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RIO COMMUNITIES—Even though the city of Rio Communities received an unmodified audit, the auditing firm contracted to do the annual report found there has been a deficiency in the city’s internal controls.
SJT Group LLC, the firm that completed the city’s 2024 audit, determined there were six instances the city’s handling of its finances were lacking.
Jeremiah Armijo, CPA, principal at SJT Group LLC, told the council recently just because the city received an unmodified audit, “it doesn’t mean there were no findings or adjustments, but we do feel the city’s financial statements are materially correct ...”
According to the official audit, the findings include:
• Internal controls have not been implemented to ensure all general ledger balances are properly supported by account reconciliations and approved by management on a timely basis.
The auditor noted the city has experienced a “significant turnover within the finance department, which delayed the timely reconciliation ...”
Roy Hubbard was hired as city’s finance director last year, and was later appointed as the clerk/treasurer in December. He resigned his position in early June.
The city has since retained a financial accounting firm, Beasley-Mitchell, to safeguard internal processes.
• A significant deficiency was found in regards to electronic payments to vendors. According to the audit, the accounting firm found the city had made payment in September in the amount of $8,330 to a vendor, and another $36,121 payment to another vendor in December.
The audit revealed these two payments lacked approval of the city manager or city council for payment.
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In the city’s response to the finding, it said they are in the process of formally documenting policies and procedures for electronic payments to vendors that require documentation to be maintained in vendor files to demonstrated they were properly authorized.
• The third finding in the city’s audit had to do with a number of purchase orders.
“For eight of the (25) transactions tested, we found that the purchase order did not have a signature from a certified purchasing officer.”
The city staff told the auditors it has implemented policies and procedures to ensure all purchase orders are signed by a certified purchasing officer.
• The audit also found the city’s budget adjustments were not approved and processed to correct the over-expenditure of budgeted amounts.
The city’s management has implemented procedures to ensure budgets are actively monitored and budget adjustments requested are processed as appropriate.
• The city also was found to have submitted their audit late to the state. The city did not deliver a draft of its annual financial report by the due date of Dec. 15, 2024.
In its response to the audit finding, the city said it retained the services of Beasley-Mitchell for special projects to safeguard internal processes.
• The last finding in the city’s financial audit revealed a former employee “mistakenly” used the city’s purchasing card in the amount of $2,600 on a personal purchase.
The employee, according to the audit, reported the mistake to management. The city had asked the bank for a refund, but it was never received and the “outstanding receivable as not been collected.”
The auditors wrote that the city has not collected the outstanding refund owed to the city.
The city responded that it is “preparing revised policies and procedures regarding the use of purchasing cards that includes a follow-up process on outstanding refunds and credits owed to the city. Management is also submitting a demand letter to the former employee seeking repayment of the $2,600 amount.”
“These are all new findings,” Armijo told the council. “We had two findings in 2023, and they are both resolved, and there were no reoccurring issues.”
When Councilor Tom Nelson questioned City Manager Martin Moore about who has the purchasing cards and if they’re kept safe, Martin said they are given to specific employees.
“We are notified (by the bank of a purchase) and we can put a stop payment,” Martin said. “We haven’t run into this, except for this incident.”
“As a city, we’re going to have to correct these findings,” Councilor Matthew Marquez said. “We are pleased we were able to resolve last year’s findings.”
The city council unanimously voted to approved the audit.
