Regular Finance Committee Meeting 
Mon, Feb 10, 2025 · Finance Committee
https://santafeminutes.space/meeting/278

== Executive Summary ==
The Finance Committee held a meeting where the primary focus was the presentation and discussion of the Fiscal Year 2024 audit report. Chief Accounting Officer Matthew Bonifer was recognized for his significant contributions to the city's audit progress. The audit, conducted by Carr, Riggs & Ingram, resulted in an unmodified (clean) opinion on the financial statements and compliance for major federal programs, a significant achievement for the city. Director Oster highlighted the timely submission of the audit and a 38% reduction in audit findings from the previous year, with 69% of FY23 findings resolved.

The committee reviewed eight identified audit findings, which ranged from material weaknesses to significant deficiencies, across financial statement controls and federal program compliance. Management presented corrective action plans and timelines, with most issues expected to be resolved by June 30, 2025, and some requiring new technology implementations like the Munis system and Questica budget tool. The committee acknowledged the extraordinary progress made in completing four audits in 18 months and resolving numerous findings, emphasizing that audit findings serve as tools for continuous improvement. The discussion also covered the roles of external auditors and consultants, with a commitment to transitioning tasks to city staff as capacity grows.

Councilors praised the finance department's diligent work and the significant improvements in the city's financial reporting and internal controls. The meeting concluded with an action item for Director Oster to distribute digital copies of the audit report to the full governing body, in addition to its availability online. The overall sentiment was one of celebration for the progress achieved and a commitment to addressing the remaining findings.

== Key Decisions ==
- Approval of the meeting agenda.
- Approval of the consent agenda.

== Motions & Votes ==
- Motion to approve the meeting agenda — Carried.
- Motion to approve the consent agenda — Carried.

== Public Comment ==
Matthew Bonifer expressed appreciation for the finance team and his excitement to be part of it. Director Oster highlighted the achievement of submitting the FY24 audit on time, the clean opinion, and the significant reduction and resolution of audit findings. AJ Bowers from Carr, Riggs & Ingram detailed the audit timeline, scope, and the unmodified opinion. Counselor Lee Garcia commended the team's progress, noting the reduced number of findings and confirming that findings are common in municipalities. The Chairwoman expressed excitement about the Questica budget tool and the remarkable progress in completing multiple audits. Director Oster thanked her team, city departments, and leadership for their support, calling the audit completion a "moment to celebrate." Councilor Fowler reiterated that audits are beneficial for organizational improvement and confirmed the report's availability online, congratulating the finance department on their "really fine work."

== Topics ==
- FY24 Audit Results
- Audit Process & Scope
- Consultant Utilization
- Forensic Audits
- Staff Recognition
- Internal Controls Improvement
- City-wide Audit Effort
- Audit Transparency

== Full Transcript ==
Let me know when we're live. We are live. Okay, thank you. At 5:05, I'm calling to order the Finance Committee for today, February 10th. And if we could get a roll call, please.

Certainly, Madam Chair. Councilor Cassutt? Here. Councilor Lindell? Councilor Fowler? Here. Councilor Lee Garcia? Here. I'm here. You have a quorum.

Terrific. Do we have changes to tonight's agenda?

No changes from staff.

Second a motion, a second to approve the agenda for tonight. All those in favor? Aye. Anybody opposed? That motion carries. Approval of the consent agenda. I don't believe there were any items that were pulled. Is there anything the committee would like to pull in this moment?

Move to approve.

Second.

Motion and a second to approve tonight's consent agenda. All those in favor? Aye. Anybody opposed? That motion passes. We are on to presentations. We have Director Oster at the podium to do our first presentation, which is a staff recognition.

Thank you so much, Madam Chair. It is my honor tonight to recognize our Chief Accounting Officer, Matthew Bonifer. Matt, do you want to come up? Thank you. Matt is our Accounting Officer for the City of Santa Fe, and he joined the finance team in January of 2024. Before joining his colleagues at the city, Matthew began a decade career in public accounting, followed by financial director roles both in Santa Fe and in California. Matthew is a licensed CPA within the state of New Mexico and holds a Master's degree in Accounting and Information Assurance from the University of New Mexico's Anderson School of Business, as well as a Bachelor's degree in Finance and Marketing. Outside of work, he brings a deep knowledge of public accounting and auditing, guiding a team of incredible financial specialists who are as extraordinary at their jobs as they are being remarkable humans. Outside of work, he enjoys adventuring with family and friends, reading through his library of books, being less than helpful in the kitchen, and enjoying life's most perfect pleasure: New Mexico sunset.

So, outside of that wonderful bio about Matt, I just wanted to acknowledge Matt as having an instrumental role in the city's progress and getting caught up on our audits. When Matt joined the team in January of last year, I basically said, "I'm burnt out on audits. I need you to take this over." And you never looked back. You picked up 2023 and ran with it. We got 23 done, we got 24 done, and here we are presenting the results of an on-time audit for FY24. So, as we get into the audit results, we'll talk a lot about what Matt has helped the city achieve over the last year. But it is just really my honor and my pleasure to have the opportunity to work with Matt and to present this award to him this evening, which is a Certificate of Appreciation. It says, "This certificate is given to Matthew Bonifer in appreciation for performance, service, and dedication to the City of Santa Fe Finance Department." Thank you so much, Matt. It is an understatement to say that we would not be here today without you. Thank you so much.

Thank you. Matt, did you want to say anything? You're a numbers guy, so I bet you're a man of few words.

And I'll keep it as such. I think we're all here for the real presentation from the auditors here, but I'll just appreciate everything Emily does here in leading the Finance Department and the great team that she's put together. And I'm just ecstatic to be a part of it, and onward we go. So, thank you all.

Thank you. I know you've been a critical part of getting the audits back on track and also very helpful to Emily, as she mentioned. So, congratulations and thank you. Okay, with that, we will move on to the main event, the Fiscal Year 2024 Audit Report. And we have Director Oster, as well as AJ Bowers with a partner with Carr, Riggs & Ingram. And I'll kick it over to you.

Thank you so much, Counselor. And Matt, of course, will also help us with this presentation. So, I'll start with a little bit of introduction, and then I'll hand it over to AJ to take us through the results of the FY24 audit. I just want to set the stage a little bit from my perspective as your Finance Director. I already talked about the timeliness. Of course, that's been a huge goal, and we did achieve that goal of submitting the FY24 audit on time, which is a milestone for the city. I am really delighted that the results of that audit are now public, so we can talk to you about how this is a clean audit, meaning that the opinion is unmodified, which is the best opinion type that there is. The number of findings was reduced to just eight, which is a 38% decrease from the prior year. We'll talk a little bit more as AJ takes the reins for the presentation about what those findings are. But just in terms of highlights, that unmodified opinion is the best opinion that you can get, and I'm very proud that the city has achieved that for FY24.

For the audit report on the federal audit, the federal compliance audit, also referred to as the single audit, was also unmodified or clean, which is an improvement over the prior year. We had a modification on the Airport Improvement Program for FY23, so I'm very proud of the fact that we were able to resolve that. We talked about the eight findings in the FY24 audit. Again, that is a decrease of 38% from 13 findings in FY23. And one thing that I think it's important to note is that nine of those 13 findings from FY23 were resolved, which is 69%. So, 69% of those issues that were identified in the FY23 audit, which we just completed in May of 2024, were resolved by the time we completed the FY24 audit. And to me, that really demonstrates the city's progress in implementing improved internal controls and business process improvements in a compressed time period where we were still working on getting caught up on our audits.

In the course of the four audits that Carr, Riggs & Ingram has done with us, which is FY21, 22, 23, and 24, the city has resolved a total of 37 findings. And that was taking place, it was four years of audits, but the time period that those audits were completed was basically about two years. We submitted them all to the State Auditor in an 18-month period, and we were able to resolve 37 findings over the course of those four audits, which I am really, really proud of. So, with that, I'm going to hand it off to AJ to take you through the presentation.

Thank you, Emily. Chairman, members of the committee, thank you for having me today. My name is AJ. I've been here multiple times, so you guys all probably know me by now. But we'll kind of walk through the presentation that Emily had talked about here. Okay, what we'll go over today is just kind of the timeline itself, the overall scope of work, and what those reports are, and then any sort of questions that you have, right? So, just go ahead and interject when you have them. I'm sure Emily will touch base on some of the different pieces that are within there. But as we wanted to start with the timeline, as we talk about June 30, 2024, right, we've been in this room three other times as it relates to different audits. And so, this is much more normal as it relates to the standard process for a June 30 audit, right? So, the planning time frame, we were a little later than I would normally put it, but that's because we had just finished the prior one. But from a July through September time frame, we really worked through the planning pieces of the audit itself. The fieldwork was really October through December. The exit conference was December 10th. The independent audit report was December 16th. That was the regulatory deadline. The deadline of December 15th fell on a Sunday, so the next day was the day of the deadline, which is that Monday. It was submitted to the Auditor's Office on that day, which would be on time, and then was released from there after they do their review, send it back, make a few adjustments, or tell them we're not going to make those adjustments for one reason or another. And then they released it on January 27th. So, here we are today. That's when it became public. It was on the 27th, so it's been out there for two weeks now.

So, the scope of work itself. So, what we talk about when we look at the financial statements is the audit of June 30, 2024, for the financial statements. Okay, so that's going to be kind of that first report that's in there that we talk about. We'll get there here in a moment. So, we're looking to determine, is the financial statements fair and reasonably presented? That's what we're going to be talking about. We also did a single audit over three different major federal programs: so, the Airport Improvement Program, the Federal Transit Cluster, and the Coronavirus State and Local Fiscal Recovery Fund. So, we render opinions upon the financial statements, as well as those individual single audit programs as well. And we'll talk about those here in a moment. And we also look for compliance as it relates to the New Mexico State Audit Rule. So, the state puts out a whole bunch of different requirements or different pieces that we look at as it relates to the compliance. We don't render an opinion on compliance within the New Mexico State Audit Rule, but we do test the items as required and report on them as required.

So, into the reports. So, you should really have two documents. One of them is the financial statements themselves. That's the one that I'm going to walk through. Okay, the second document is going to be the required communication packet. That is a packet from us to you, okay, to the board. And it's got a whole bunch of different pieces in there towards the front of that packet. So, I'm going to just mention what the required communication is first, and then we'll get into the financials. The required communication is basically a bunch of communication that we have to present to those charged with governance in accordance with auditing standards. Sometimes I call these the "don't use a snowblower on the roof" kind of things of, "This is what you asked us to do. This is what we did. These are the findings. This is where they are." And just kind of informing you, you know, you asked for an audit under these standards, this is what we presented. So, there's a good portion of that. Then there will be some portions in there about significant judgments and estimates. Okay, those are the soft numbers that we'll talk about here in a moment. It'll have all of the journal entries. Now, we put all of them in. Some of that is just a functionality of how the system works, but that way the city has all of the journal entries that were posted. It has the representation letter that was provided, that you provide to us at the end, to basically say that you didn't lie, cheat, and steal. You allowed us to work on the audit itself and didn't prohibit us from doing any work. Okay, so that's kind of what that packet is. I just wanted to mention it because you do have that. The document I'm going to walk through is going to really be the financial statements themselves. Okay, and so within that financial statement, you're going to have three different reports. So, the first one is the Independent Auditor Report, and that's pages 10 through 13. It's a four-page report within those financials. It's on our letterhead that basically says the financial statements are, it's an unmodified opinion. So, as Emily said, that's the best opinion that you can get. It means that the financial statements are fairly presented in accordance with GAAP. There's no areas where we couldn't obtain sufficient appropriate audit evidence. So, whether that's what we call a hard number or tangible number, okay, so cash investments, we can, you know, if there's a transaction, we can go see a bill. There's a physical piece that we can look at to be able to substantiate that. Those estimates are what we call those soft numbers. So, when you have insurance claims, depreciation expense, pension expenses, we go through.

a process to test your policies, procedures, and industry standards to ensure that those numbers can be relied upon. So we will opine on those. The first real big thing that we all look at from the audit itself is an unmodified opinion. Again, that's a good thing. You've been for the last few years, we didn't anticipate different. So that's pages 10 through 13 towards the back of the financial.

So it's going to be about pages 200 and 201. It's going to be the independent auditor report on internal controls and financial reporting and compliance in accordance with government auditing standards. So what that is, we call that the Yellow Book report, the government auditing standards report. What that means is that's a report that under government auditing standards, which you're audited under, because in the state of New Mexico, any audit that's done under the state audit rule has to have those standards, as well as if you have a single audit, it requires those standards. So part of that is more a reporting aspect and some other things that we have to consider from outside of just generally accepted auditing standards. So part of that is the reporting itself. So that report is negative assurance. So what that means is we don't render an opinion on internal controls, but these are items that we've identified. Others may exist that we did not. So we're just reporting things that we find.

So when you look at the level of findings under government auditing standards, there's three levels. There's material weakness. That's the highest level. If something goes wrong here, it could materially affect the financial statements. You had one material weakness finding. The next level down is a significant deficiency. The definition is, it doesn't rise to the level of material, yet still merits the attention of the governing body. It might take policy, procedure, resources, something along those lines. It's significant enough to inform the board. So you had one of those findings. There's material non-compliance under Yellow Book. So that would be if you don't comply with a debt covenant or a grant or something in a material fashion, then it would be reported there under government, and there were none of those this year.

In the state of New Mexico, we report anything that we find to you. There's two other levels. So other matter would be a finding that doesn't rise to the level of a significant deficiency. And then other non-compliance would be a finding that doesn't rise to the level of material. And so you had two other non-compliance findings. So when we look at the findings themselves, the whole of them is pages 212 through 228. There are four findings that are related to the financial statement controls. So one material weakness, one significant deficiency, two other non-compliance. We'll go over the highlights of those in just a moment.

The next report is going to be the independent auditor's report on compliance for each major federal program in accordance with the uniform guidance. So on pages 203 to 205, that's the third report that's in there. That's over the single audit. So within that report, we render an opinion upon compliance as it relates to each of the major federal programs. As Emily said, it was an unmodified opinion on all three programs. So when you read in there, it says the opinion is unmodified and in all material respects with the material compliance requirements.

So within the Airport Improvement Program, again, unmodified. We did previously audit that in 2021, 2022, and 2023. So this is the fourth year in a row that that program has been audited. It was unmodified in the current year. There was one material weakness over compliance that was identified and two significant deficiencies that were over compliance that were identified specific to the Airport Improvement Program. So those are what we call, say, the findings in that matter. It's related specifically to the controls around the compliance there. It didn't rise to a non-compliance, but these are the controls that say something goes wrong here, you can become out of compliance. So it's the same definitions.

The Federal Transit Cluster was an unmodified opinion. That was previously audited in 2021 and 2023. And so that one there had one finding, a significant deficiency over controls. Again, not a material item, not any non-compliance. It was noted, but a significant deficiency in controls. And lastly is the COVID-19, the Coronavirus State and Local Relief Program. That was an unmodified opinion as well, and that was previously audited in 2021 and 2023. And so that one there also had one significant deficient finding. So when you look at those programs, there were some control matters related to the compliance with those, but we didn't note non-compliance material to those programs, meaning that the unmodified opinions are there. Those findings are part of the whole group of them, but they're targeted on pages 217 to 224 as it relates to the federal awards themselves.

Just as a real quick reminder, I always like to remind everyone of what the audit is. Of course, we're here to form and express an opinion on the financial statements. We don't test every transaction, test down to the penny. It's a high level of assurance. So we're looking to determine is anything that's missed a material issue. So then, of course, as I mentioned, that negative assurance report, we consider internal controls for the designing of our audit procedures, but it's not rendering that opinion. And then we communicate all significant matters to you. So as part of our entrance conference, exit conference, presentations, required communication, we want to make sure that the board is in the loop as it relates to the audit itself.

So that was our responsibilities. So from management side, the internal controls, the audit itself is a good tool, but it is not part of your internal control structure. It's an outside area. So from it relates to a monitoring aspect. So management, with the help of the board and the trust of the board, puts people in place and gives resources in order to ensure that you're providing the resources in order to have those monitoring. So ongoing monitoring activities is always part of the control structure. And so we like to always mention that because you could have the best control structure ever, but if no one's paying attention, it doesn't exist. That's the COSO framework.

The selection of accounting policies and principles. So we'll provide guidance and help when it comes to these complex GASB standards or whatever. We'll do that, but we don't make those decisions. The decisions are, of course, yours because we're independent. Financial statements, we did prepare as a service, but from the information provided from you all and from your complete and accurate accounting records, the maintenance of those is a responsibility, of course, of the city. So we don't maintain your records for you. So they're your records to have. And then designing and implementation of those programs and controls to prevent and detect fraud. So as you put programs in place, you have to consider what are the controls we need with the consideration of fraud and misappropriation, looking through that lens. And then lastly, the board participates in that process. Like I said, you're in the loop, the entrance conference, exit conference, the presentations, the communication, et cetera. So that's kind of the highlights from the auditor speak of where things were.

When we get into the findings themselves, what we've done here, just like we've done in the past, kind of give you those ones. And if with questions, I'll let Emily kind of go through the details of what maybe has been done or if you have questions over them specifically. But when I wanted to give you the page numbers of where the specific findings are, as well as the finding numbers. So when you have the, just to kind of recap, the FS means financial statement. Those are things that are not related to the federal awards. It's related to the financial statement controls themselves. The year, the 2024, that's the year in which the finding began. So that's the current year we're in. And the 001, it follows this numbering system. This is the first finding of this year. After the 24, if there's a repeat finding, after the finding number, it will be in parentheses to keep a historical tracking of repeat findings. So these are both new findings because we don't have that piece in there.

So the first one that's on pages 213 and 214, it's a material weakness finding. So that's what's in the parenthesis at the back, that MW. So this is controls over construction and progress. The second finding is the general ledger corrections. That's a significant deficiency. That's going to be on pages 215 and 216. Both of those were new. Those are the two financial statement findings that we talked about.

The next findings here are in relation to the federal awards and the federal programs. So it says federal finding in there. Again, same qualifications of significant deficiencies and material weaknesses, but we wanted to let you know what program that they affected. And so that first one is a significant deficiency as it relates to reimbursement requests. And it was actually in both the Airport Improvement Program and the Federal Transit Cluster. So you would see both of those programs identified on pages 217 and 218 with that finding criteria there.

The next finding is a repeat finding. So as you can see, 2024-004 in parentheses has 2023-4. So this is an allowable cost item over payroll. This is a significant deficiency in the Airport Improvement Program, and that's on pages 219 and 220. The next one is another repeat finding from the prior year. So it's equipment and real property management in the Airport Improvement Program as well on pages 221 and 222.

One more federal finding here for subrecipient monitoring is a significant deficiency. This was a new finding, and this was in the COVID-19 program, which will be detailed on pages 223 and 224. So that'll kind of summarize where the location is of those federal findings.

And then the last two here is a state audit rule finding. So these are these other non-compliance. So this was a pledged collateral other non-compliance, and it's finding number seven in the current year. And this is a repeat from 2021. So that's where you'll see that 2021 in there. That's on page 225. And then this other one here, state audit finding number eight, this is a repeat from 2021 also. This is a cash appropriations in excess of available cash balances. And again, that's an other non-compliance, pages 226 and 227.

I do encourage you, when you look at the findings themselves, you'll have the condition of what happened. The criteria is, say, what was violated. The cause, why did it happen? The effect is what can kind of go wrong. You'll have our recommendation, and you'll have the management's response to all of those findings. If it's a repeat finding, you will also have in the condition itself the progress since the last time if it's a repeat. And then in the management response, kind of when they anticipate having it corrected.

And since we're talking of corrected findings, I do want to mention the corrected findings from the prior year. So here's a list of the one, two, three, five, six, seven, eight, nine findings that were corrected in the current year. So most of those were repeats from prior years. So when you're talking about the CA, that was a really big finding that was resolved. Some of those were pretty material items, material weaknesses. I didn't write that on here, but they definitely, that was a material weakness. That was a finding from 2019. The controls over the financial close and reporting was a finding from 2017. The controls over cash balances was a finding from 2020. There was an allowable activity.

This item from 23 that was resolved, financial reporting, was resolved. That was a repeat from 21. A budgetary finding was resolved; that was a repeat from 2020. Controls over vendor information and bank account authorized signers were both new in 23 and corrected. Then the late audit report was resolved with the timely submission, and that's been a repeat since 2019. So that's kind of the real quick run-through. So I know there's a question. Boy, that was quick. It was quick. It was quick.

I will just say that I think this report is not new to us. We did have a briefing on it when it was submitted, and we went through each item. I would just note that the management response is titled "Views of Responsible Officials and Planned Corrective Action." Correct, correct in that. So it doesn't actually say "management response" in case somebody's looking through here and trying to find, "Where's the management response? I don't see it." I also noted that there is, on the ones that are repeat, something entitled "Management Progress on Repeat Findings."

And just one other thing, so we have eight findings. Director Oster, without putting you on the spot too much, but with putting you on the spot, can you characterize kind of generally how long you think it'll take us to address the eight? Are they something that we'll be able to correct in the next round? Are they multifaceted or phased things that have to happen? And I don't know, is that an unfair question without going through every single one of them?

Not at all, Counselor. I think there is a range of complexity within the eight findings that we have in this year's audit report. And like AJ mentioned, there is a range of severity as well. So we are focused on corrective action for all of these findings, all eight of these findings. In the audit report itself, you can see a timeline and estimated completion date for each finding. So for example, for the first finding that is on page 214, so for the controls over construction and progress, we are working towards trying to have that corrective action completed by June 30th of 2026. I think that one is the longest one. The reason is because this involves implementation of new functionality in the Munis system. And then, of course, there's a lot more detail about what exactly we are doing to address this finding.

I am pleased to report that we have hired a new employee who just started at the beginning of this month to take over the role of accounting manager for capital assets and construction in process. So that position is really key to the corrective action. And we had an offer out at the time that we were working on the corrective action, and I'm happy to report that that position has now been filled. So that's good progress just since we wrote the corrective action for this finding. But as far as, you know, on a global sense, I can say that we are actively working on corrective action for all of these findings, and the estimated timeline really varies. Some of them we think we can get resolved by the end of the current fiscal year, June 30th of 2025. And then there's the one that I mentioned over CIP that we think it may take us about 18 months, and the rest are in between there.

Yeah, and if I look at it, there are eight, and one will take, as you mentioned, 18 months. Then most of them look like they'll be resolved by June 30th, like, let's say six of them. And then the last one might be the end of the calendar year. So actually, on balance, pretty quick resolution. So that's potentially good progress, I think.

Absolutely, Madam Chair. And those two, the first and the last, finding number one and number eight, the reason that the corrective action is taking a little bit longer there is because of technology. We're implementing new technology. And in the case of finding number eight, that is a new budget tool that we've talked about here before called Questica. So we're very excited about both the functionality for capital assets and construction in process in the Munis system and the Questica software on the budget side.

Yeah, I think this committee is very excited about Questica too. Okay, I want to go to the committee for questions. Just, yeah, Counselor Lee Garcia.

Thank you, Madam Chair, and thank you for the quick presentation. And obviously, the book is a little not as thick as previous ones that we've received. And, you know, that shows that we're headed in the right direction. Kudos to you and your team. And I just, you know, ultimately, it's, I know it's a whole team effort, but it's the city manager is charged with and directed, and once these are our findings that are brought out, and again, we talk about the findings, but obviously, they are tools for staff and management to use in order to make the corrections, right? And so, I guess, you know, now that we've had a void in the city manager's position for not too long, but I'm hopeful that continuing on the work and really digging deep into some of these items, you know, I think I asked a question previous years that, is it common to have findings? And I think AJ, Mr. Bowers, you mentioned that most municipalities do that, correct?

Garcia, yes, my experience is that most places do have findings of some sort, right? Different levels, different severity. I have seen audits with no findings. It does happen. But findings are something that occurred, right? And again, I think that the complexity of cities, obviously there's many departments, is the reason for this. I'm just guessing.

I would say each individual one, I would look at the cause, okay? Because each finding will have its own reasoning to it. So it could have been complexity, it could be technology, it could be an oversight. You know, there's, there's multiple reasons that things do occur. So I definitely look at the individual causes for each individual respective finding.

So in other words, you're saying that it's, it's important for us to take a look at all of these, you know, kind of break it down into pieces rather than just as a whole.

Yes, yes. I would definitely look at it individually instead of from a generalized perspective because as Ms. Oster said, the construction and progress one is a technology thing, right? As it relates to implementing and having someone that's over top of that particular section versus say, I would say the pledge collateral, which is working with a bank on something very different, right? So looking at those two things, it's not a one-size-fits-all solution for those two items.

Okay, just some clarification there. Obviously, again, thank you for the work on this, and I'm glad to hear that we're filling spots that are critical to getting all this stuff done. So I appreciate it. No more questions. Thank you very much.

Yeah, and just to follow up on that a little bit, I mean, these, when we find findings, I don't know, speak to that a little bit in terms philosophically a little bit more. I mean, it's, it, it's helping us improve, right? We're, we're, and I guess to the counselor's point, like, it's, you know, nobody's perfect, and we can always improve and do better and refine our systems, and findings are part of the way we do that.

Chairwoman, remember, I definitely look at that from a perspective of finding, right? I mean, I'm not a huge fan of the term, but it's basically because we found something, okay? So in the state of New Mexico, I like to be very specific about what government auditing standards require versus what New Mexico requires. So if you were in say a different state, you would still have those other matters, but they, they come to you in that management report or they might be verbal. Here in the state of New Mexico, we report everything in the financial statements. So what we're held to is an 100% A+ threshold. I wasn't an A+ student, right? Like it's hard to have a 4.4, so or 4.0, right? So we're going to make mistakes and things are going to happen. Not to mention that, you know, the new findings come up because for one, you might be focusing on something. We have to incorporate unpredictability annually now. Emily knows every year we're going to audit fixed assets, we're going to audit cash, but we have to incorporate unpredictability regardless of how long we've been doing the audit in order to have some new area to look at. So you're always testing some new spot, you're always risk assessing to determine what's there. So we expect there to be some sort of finding just because things happen, right? People make mistakes. Most of the time, I'm not going to categorically say that, but, you know, not always intentional. If it's intentional, that's a different issue. That's the fraud and misrepresentation that we were talking about. But most of the time, you know, some just, it's hard to get it right every single time, every single day in a fast-moving, dynamic, fast-moving world.

Yeah, dynamic organization, especially. And when you look at it from an, I mean, from an auditor perspective, we look at things like change and turnover and question item. And so then our risk would increase. And so where there's more risk, we do more work. Where there's less risk, we can pivot to do other things. We still have to look at things from a materiality perspective, but we follow the standards as it relates to our risk assessments. So there's always something new that we're going to look at.

Yeah, and I think, you know, some of what we've been seeing is certainly around technology. We haven't kept up. We're, we're changing that. Some of it is around policies and procedures, which have been not always at their highest level, and I think we're changing that. So I, I think this is great progress, and it's again, extraordinary to have finished how many audits in 18 months? Four. Four, yeah. That's, that's, that's pretty extraordinary in and of itself, isn't it?

It might be the first time I've done that. We, it might not be the first. We've done a few that we've had to do some catch-up, but it's never easy. But when we were talking about findings and the repeats, it's because you get this report, it's public. It was in public in January, yeah. So all of this stuff, in theory, you've operated for seven months without having this in front of you in order to take corrective action. So part of that with a repeat, we expect it is you've operated for seven months without the knowledge of being able to do that. Now Emily's known or what, you know, throughout the exit conference and there's been briefings and different discussion, but it hasn't been discussed in a formal area to where if something needs taken care of. So you've got to look at it with that lens as well to know seven months past year ended, 50, 60% of the year already. So you're going to have some of that. It happens when you get really far behind, really hard to get caught up, and it's hard to correct those things. So it's going to happen, and there'll be something new next year, possibly.

Yeah, yeah. I, no, not there yet. Well, I think this is, I, I think this is remarkable progress and should be acknowledged as such, because it, it not only just finishing the number of audits in the time period, but also to your point, resolving so many in those windows that are even shorter because the period of time in which we were submitting the audits was shorter. So that window that you described has been even more condensed when you're trying, when you've, when we've done four in 18 months instead of one in whatever a year. So, yes.

And for that, I just want to say thank you to the city and the city's department to be able to help us and our team. And really all the credit goes to my team. You know, I get to just stand up here and and take questions, but they're the ones that do a ton of the work. Doesn't mean I don't do it. We're, we're all working hard, but they're, they're the ones that get all the credit.

Well, and I think as we saw with

our staff recognition. It's a team sport on both sides, and it's good to have good leaders on those teams, but it's everybody kind of rowing together that's making it happen.

Councilor Lee Garcia: Back to you, Chair. So we were utilizing a couple of outside sources. Can you just elaborate that again? I know this is Carr, Riggs & Ingram, correct, that you, Mr. P, were just Carr, Riggs & Ingram?

Mr. P: Yes, so we're Carr, Riggs & Ingram. We're the external auditor, not a consultant. So back to Director Oster, we were utilizing another company. Remind me what the name was.

Director Oster: Sure, absolutely. So Carr, Riggs & Ingram is our external auditor, and we've also utilized CliftonLarsonAllen as a consultant.

Councilor Lee Garcia: Okay. And are we still utilizing them, or has our need for them diminished somewhat now as staffing is coming up?

Director Oster: It's a great question, Counselor. So we are still utilizing CliftonLarsonAllen. However, we're working on transferring the work that they're continuing to assist with. The city staff capital assets is a good example where we had a staff transition. We had a staff member retire in November. We had a period of time where we're recruiting, and we're continuing to work with CliftonLarsonAllen. And one of the things that one of the first things that we are having the new staff member do is get up to speed by sitting with CliftonLarsonAllen and having them go over the work that they've been doing in preparation for the staff member to try to take on more of that. Now, I mentioned when we were talking about corrective action for the finding that there is a technology piece of this as well. So with fixed assets, the CliftonLarsonAllen team is maintaining our records, our detailed records for fixed assets on their system. As we get that technology implemented in Munis, the staff member that is overseeing the capital assets area will be working on getting that information into our Munis system. So the short answer to your question would be that yes, we are still utilizing consulting resources, but we are working on transferring those tasks that are still being done by consultants over to city staff.

Councilor Lee Garcia: Thank you. The last question I'll have, and I guess this will be in regards to, obviously, I don't know if you know the history, have we ever had to go through some sort of a forensic audit? I mean, I know that's a whole different idea. This is the high-level one where we're looking at it from 10,000 feet above. But when have we ever had to dig into an issue where we're really trying to find a problem? Have we ever had that?

Director Oster: Counselor Lee Garcia, not during my tenure with the city. We have not had a forensic audit during the two and a half years that I've worked for the city. I really can't speak to things that may have happened before I became a city employee. But I can say that one of the things that AJ talked about in his presentation at the very beginning was the scope of the external financial statement audit. And I will say the scope of a forensic audit would be very different from what we would do in an external financial statement audit. AJ, do you want to speak to that at all about that difference in the scope?

AJ: Sure, I'll speak a little bit to it. Obviously, from an external audit perspective, we're looking at the financial statements as a whole, right? The transactions to determine if there's a material area. I personally don't do forensic audits, but forensic audits, you'd probably be identifying a very specific area and then going and a very specific time period. So let's hypothetically say, you know, utility receivables between 2018 to 2022 because of billing and overbilling, right? And so you would target those items very specific and get down into the details of all of those transactions versus, and or maybe sampling. We do a huge amount of sampling. We don't test all of that stuff. So very different scope. I don't know if there was one that was a hypothetical, but that was, I guess that hopefully would answer the scope question. So I, and there wasn't that I'm aware of within the four years we were doing the audit itself of during this time frame of a forensic audit trigger. It obviously, I mean, something triggered that because that decision would fall back on you, correct, Director Oster? You found something that was...

Director Oster: Chair, Mayor, and Councilor Lee Garcia, I think there are a number of things that could trigger a forensic audit. It's hard to think in hypotheticals, but I could imagine a scenario where there was a concern about me. So I wouldn't be the one to initiate a forensic audit in that case. But like I said, I mean, we're really talking about hypotheticals here. And I think one of the really important things that AJ said just now was that he doesn't do forensic audits. It's a completely different type of auditing that's performed by different professionals.

Councilor Lee Garcia: Yeah, again, I just understanding, you know, the overall intent of what this is, plus and how we use it versus utilizing that data to trigger some sort of another investigation into where, you know, where we're having issues. But, and I know that's a whole another topic, and that's all I had, Madam Chair. Thank you much.

Chair: Okay, just to follow up again, we would have to have a reason to do a forensic audit, and that's not necessarily going to come out of this audit of financial statements. But, Madam Chair, the annual financial statement and compliance audit is required by state law. It's a process that's overseen by the State Auditor for all governmental entities in the state of New Mexico. So I would describe it as a routine process. It's an annual process that's required for all governmental entities in the state of New Mexico. And these annual audits are performed under the purview of the Office of the State Auditor. If the entity that is under audit is required to have a federal compliance audit, a single audit, which is based on the number, the amount of money, the amount of federal money that that entity expends in that year, then it's typically performed in conjunction with the annual financial statement audit in my experience here in New Mexico. A forensic audit would be a completely different set of facts and circumstances, and I agree there would typically be something that caused concern that was being addressed potentially in part through a forensic audit. So that is a very unusual, non-routine situation. The audit that we've presented to you today is the result of a standard annual process that happens every year for all governmental entities in New Mexico. So yeah, right. And so that concern that might trigger a forensic audit would also help define the scope that AJ talked about, which would be, I mean, a forensic audit is a really tight thing, right? You got to look very carefully at kind of the chain of transactions because you're looking for a particular thing that you've been flagged might have occurred.

Director Oster: Madam Chair, I also am not a forensic auditor, but the situations that I am aware of where forensic audits have been performed have mostly involved allegations of fraud. And I'm not aware of anything like that during my time here at the city. So that is one circumstance that might lead to a forensic audit.

Chair: Yeah, okay. Well, and I guess the only other thing I would point out is that I think we are very fortunate to have CLA on contract. They have really helped to not only get these audits straight, but to do some work in the department that is really critical for the operations. And I would note that we use outside consultants probably in every department we have across the city, and that they add value and are often really important to the operations of the city. So even when we have a high level of staff, we're still reaching out to consultants for various things because either we can't hire the kind of expertise in-house to do that, or they're helping us do something that, you know, is just beyond the capacity of the current workforce we have. So it's not a bad thing, I think, to have those consultants on board. So anyway, I thank them for their work, and I also thank you, AJ, and Clifton, Clifton, you think I've got this by now? Carr, Riggs & Ingram, sorry, for the work that you've been doing. So thank you. Anything else?

Director Oster: All right. Yes, Chair. Well, I'd like to add just one more thing in closing, which is that, you know, we've talked a couple of times this evening about how expansive the scope of an annual financial statement audit is. And I just want to acknowledge a number of city departments that were really key in completing this audit. And I want to start out by saying, you know, every city department has participated in our efforts to get caught up on audits, and every city department contributed to the timely completion of the FY24 audit. But just to give you a little sample, you know, I have an Oscar-worthy list of names here of people to thank, but I will, you know, very well from that for right now. But I just want to read off this is a list of city departments that participated on short notice in the last two weeks that we worked on the audit. You know, AJ talked about we started this project for specifically FY24's audit in July. And just in the last two weeks, we worked with IT, Legal, Municipal Court, Parking, Utilities, HR, Transit, Youth and Family Services, Economic Development, and Airport. And as I said before, every city department participated throughout the scope of the audit from July all the way into December. But just in the last two weeks, we worked with all those different city departments, many of them on short notice as we were trying to push hard to meet the deadline. So I just want to really, really acknowledge and reiterate that this has been a city-wide effort. Getting the FY24 audit done on time, resolving those 37 findings while we were also completing four audits, took the focus and the dedication and support of the entire city team. And I really credit the leadership of the Mayor, City Manager John Blair, Interim City Manager Randy Randall. They really set the tone that this was a priority. The governing body has been nothing but supportive of me as we've worked through this process. And I think that we should all really feel proud of this accomplishment. I know that I do, and I'm very, very grateful to my colleagues throughout city government, our external auditors, Carr, Riggs & Ingram, and our consultants, CliftonLarsonAllen. So I feel like this is a moment to celebrate, and so I want us to do that. Thank you.

Chair: Totally agree. Yes, Councilor Fowler.

Councilor Fowler: Just briefly, I do want to reiterate, audits are not a bad word. Organizations are super smart for doing external and internal audits because it's again where you find you have some challenges and maybe you find you had opportunities and you learned something good and improved. And all organizations should do audits voluntarily. The only other thing I have is, can we get these digitally, Madam Chair?

Director Oster: And Councilor, we have the documents posted on the city's website. I can certainly send them out by email. But we, the required communications, I'll need to get that from AJ because that just goes to the governing body. But the audit report itself is already posted electronically, and I will send that out to the full governing body by email.

Councilor Fowler: Yeah, that would be terrific. Thank you. That'd be helpful. And just again for the public, it is on the webpage. Is it on the first page, or they have to go to the finance department?

Director Oster: Madam Chair, on the city webpage under the finance department is where you can find our external audits post.

Councilor Fowler: Okay, so these big books that we're looking at right here at our desks, available to everybody on the website. Okay. Well, congratulations. Agree, much to celebrate.

ate, and just really fine work. Thank you to the whole group, really extraordinary. All right, with that, I think we have Matters from staff. That's back to you, Director.

Director: Thank you, Madam Chair. No Matters from staff.

Okay, I'm going to my agenda. Sorry, I was deep in the report. So, let's see. Matters from the committee? No Matters from the committee. And Matters from the Chair, our next meeting, Monday, February 24th. And with that, we are adjourned. Thank you, everyone.