Roswell council accepts state auditor's special audit after presentation of 27 findings

The Roswell City Council on March 13 accepted a special audit conducted for the city by an independent accounting firm under the direction of the New Mexico Office of the State Auditor, resolving to make the report public and to pursue the corrective steps the audit recommends.

The report, which covers the period Feb. 2017 through Feb. 2022 and lists 27 findings, was summarized to the council by Audrey Jaramillo, the independent public accountant who led the audit engagement for the Jaramillo Group, and by New Mexico State Auditor Joe Maestas. The council passed Resolution 25-14 authorizing publication of the report.

Audrey Jaramillo told the council the engagement was a consulting-style special audit, not a full financial statement opinion, and that the auditors were limited to the documents and records provided by the city. She said the report lists a broad set of control weaknesses and compliance failures, including alleged violations of the Governmental Conduct Act, possible anti-donation concerns under the state constitution, procurement-code exceptions, missing documentation for vendor payments and leases, problems reconciling some accounts (including airport-related ledgers), and at least one debt covenant shortfall noted by the auditors.

State Auditor Joe Maestas said many of the findings reflect what auditors call "management override" of controls and called the audit an opportunity for a "major reset" of the city's financial practices. "Many of those findings have been addressed already," Maestas said, while stressing the challenge of sustaining improved controls over time.

City Manager Chad Cole and other administration officials said corrective steps already are underway. The audit recommends establishing or strengthening an internal audit function, improving records retention and IT backups, tightening procurement and purchasing controls, documenting lease terms and rent collections, and creating a public fraud reporting hotline. It also recommends routine risk-assessment processes and formal project/workflow management to retain institutional knowledge.

Councilors and staff discussed several specific audit items during the presentation: procurement and late-vendor payments; the Roswell Air Center (RAC) lease and accounting discrepancies, where auditors found a separate QuickBooks ledger that did not reconcile to city accounting records; and a debt covenant shortfall auditors quantified as about $844,000 in pledged revenue shortfall during the audit period. Audrey Jaramillo said the report includes exhibits that trace the audit procedures and the items that could not be reconciled because records were not available.

At the conclusion of the presentation, the council voted to approve Resolution 25-14 to accept and publish the special audit. The roll call produced a unanimous affirmative vote (eight in favor, none opposed), and the council directed staff to continue implementing recommendations and to track clearance of the findings through the annual external audit process.

Votes at a glance - Resolution 25-14, Accept special audit report: Passed (vote recorded as unanimous). Motion to adopt moved by Councilor Korn and seconded by Councilor Barujo; outcome: approved.

Why it matters: The special audit catalogues control and compliance weaknesses over multiple years and supplies the administration and council a road map for corrective action. Auditors stressed that sustainability of reforms depends on ongoing oversight, documented procedures and a stronger control environment.

Next steps: City staff and the auditor recommended the council track corrective actions through external audit follow-up, consider establishing an internal audit/audit-committee function, expand records backup and retention, and promote the state's fraud-reporting hotline for whistleblower tips. The city manager said management has already made many of the improvements the auditors recommended and will continue to provide updates to the council.

Sources: Presentation to the Roswell City Council by Audrey Jaramillo (independent public accountant, Jaramillo Group) and Joe Maestas (New Mexico State Auditor); Roswell City Manager remarks during the March 13 council meeting.