Santa Fe finance committee: FY2024 audit clean but eight findings remain, timelines set for fixes

Santa Fe Finance Committee members heard on Feb. 10 that the City of Santa Fereceived an unmodified (clean) opinion on its fiscal year 2024 financial statements and on three major federal programs, while auditors reported eight findings and outlined corrective-action timelines.

The auditwas presented by Emily Oster, finance director, and AJ Bowers, a partner with Carr, Riggs and Ingram. Oster said the city "submitted the FY '24 audit on time" and described the report as "a clean audit, meaning that the opinion is unmodified, which is the best opinion type that there is." Bowers told the committee the independent auditorsreport was submitted on the regulatory deadline and "then they released it on January 27."

The audit matters matter because an unmodified opinion indicates the financial statements are fairly presented under generally accepted accounting principles (GAAP), while the findings identify control, compliance and process areas staff must correct. The number of findings fell to eight in FY2024, a 38% decrease from 13 findings the prior year; auditors noted the city resolved nine of those 13 prior-year findings (69%). Over four audits (FY2021through FY2024) the city resolved a total of 37 findings, the auditors said.

Most of the FY2024 findings relate to internal controls and federal-award compliance. The report identifies: - One material weakness involving controls over construction-in-progress accounting (financial-statement control); - One significant deficiency involving general ledger corrections (financial-statement control); - Federal findings affecting the Airport Improvement Program, the Federal Transit Cluster and the Coronavirus State and Local Fiscal Recovery Fund, including a significant deficiency for reimbursement requests (affecting both the Airport Improvement Program and the federal transit cluster), repeat findings on payroll allowable costs and equipment/real property management in the Airport Improvement Program, and a new significant deficiency in subrecipient monitoring for the COVID program; and - Two state-audit-rule "other noncompliance" items: pledged collateral (repeat from 2021) and cash appropriations in excess of available cash balances (repeat from 2021).

AJ Bowers told the committee the audit included an examination of the June 30, 2024 financial statements, testing of three major federal programs under the Uniform Guidance (Airport Improvement Program, Federal Transit Cluster, and Coronavirus State and Local Fiscal Recovery Fund) and procedures required by the New Mexico state audit rule. He explained the process timeline to the committee: planning Julythrough September, fieldwork Octoberthrough December, an exit conference on Dec. 10, the independent auditorsreport dated Dec. 16 (the regulatory deadline fell on a Sunday, so submission took place the next business day), and public release on Jan. 27.

Director Oster and auditors described corrective-action plans and timeframes included in the report. Oster said the corrective actions vary by complexity and severity and that management provided estimated completion dates in the audit report. For example, corrective action for the controls-over-construction finding will require new Munis functionality and is expected to be completed by June 30, 2026; she said that position-specific work also includes a newly hired accounting manager for capital assets and construction who "just started at the beginning of this month." Oster reported that several findings are anticipated to be resolved sooner: "Some of them we think we can get resolved by the end of the current fiscal year, June thirtieth of 2025," and most others are planned within the 12to 18-month window discussed in the meeting.

Committee members pressed for context on findings and how common they are. Bowers said that "most places do have findings of some sort" and that findings can stem from a variety of causes, including complexity, technology or oversight; he added that forensic audits are a different, narrower scope and are not part of the routine annual financial-statement audit. Oster and Bowers both emphasized the distinction between the annual financial and single-audit processes and the scope of a forensic audit.

The committee also discussed outside consultants. Director Oster said the city continues to use CliftonLarsonAllen as a consultant on fixed assets and related work during staff transitions but is working to transfer consultant tasks to city staff as technology and staffing allow. Oster and Bowers noted the city prepared and posted the financial statements and that the required communication packet and supporting documentation are provided to the governing body.

Votes at a glance: the meeting also approved the meeting agenda and the consent agenda by voice vote; no roll-call tallies were recorded in the committee transcript.

The audit report, required communications and supporting documents are posted on the City of Santa Fe website under the Finance Department; committee members said they will distribute the report to the full governing body by email. The Finance Committee's next scheduled meeting was announced as Monday, Feb. 24.