A “qualified audit” and sewer update were on the agenda, as Edgewood’s divided governing body held its May 27 regular meeting.
Highlights of the audit include the town an increase of $1.13 million in the town’s net position. “This is primarily due to the Town having an increase in revenues and decrease in expenses,” the report says. “This is primarily due to the decrease in spending of funds on capital outlay as compared to prior years.
At the close of the fiscal year, the unassigned balance in the general fund was $1.28 million, the report says. The town also reported ending fund balances of $3.8 million, of which $2.6 million is restricted to special revenue, capital projects, debt service and other restricted items, the report says.
The audit report also included several findings, including some that were not related to the town’s finances.
The auditor designated the audit report as “qualified,” and said “material weakness(es)” have been identified.
Specifically, the findings were for improper travel and per diem disbursement; annual inventory certification; late IPA recommendation and audit contract; stale dated check; noncompliance with the environment department; internal control over cash and monthly closing process; violation of the open meetings act; and violation of the town’s nepotism ordinance.
The finding on travel and per diem says that a hotel room cost more than the allowed rate of $215 per night; that actual rates were used for meals without receipts; and a missing signature on a mileage reimbursement form.
The town responded, saying it agrees with the auditor’s assessment and has passed a mileage and per diem policy and implemented other controls.
The finding on the annual inventory certification was identified as a material weakness. The auditor said the town did perform an annual capital asset inventory, but there were “several items” left off, and recommended the town “implement a system to accurately track, maintain and update changes in inventory on an annual basis.”
The town agreed with the recommendation of the auditors, saying that it passed a capital asset policy in June 2019, and “will perform a thorough annual physical inventory of all capital assets and update the listing based upon the policy.”
The next finding said the town didn’t submit its completed audit contract in a timely manner, submitting them June 21, 2019; the due date was May 15, 2019.
The town responded that it would “ensure the audit contract will be filed with the Office of the State Auditor in a timely manner.”
The next finding says the town had seven “stale checks” totaling $1,343. “The Town overlooked the Stale dated checks during the bank reconciliation process, and did not void these checks on a timely basis,” the report says.
The town said it will modify its bank reconciliation procedures “to identify all stale-dated checks” and include a policy on how to remove such checks from the bank reconciliation before filing an unclaimed property report.
The next finding said that the town is not in compliance with the N.M. Environment Department for a 2018 violation of the town sewer’s discharge permit.
“Cause: The Town overlooked the requirements set forth in the permit renewal dated September 4, 2015,” the report says, recommending “the Town comply with NMED requirements…”
The town responded, “Prior to January 2018, the Town had a third-party private contractor in control of operations at the waste water treatment plant and was unaware of the 2015 permit requirements. Since management became aware of the permit compliance and notice of violation, we have been working with the [NMED] Ground Water Quality Bureau to bring the Town into compliance with NMED. An action plan was submitted and approved by NMED. NMED has performed a subsequent compliance inspection of the waste water treatment plant. All but one of the permit compliance and violation issues have been resolved.”
The next finding said the town’s bank statements were not being reconciled in a timely manner, and noted that the town lost $4,000 in May 2019 due to a fraudulent check and a lack of fraud prevention services with the bank at the time.
“Additionally, as per review of the minutes we noted some instances where the monthly financial reporting packet was not provided to the trustees at the monthly council meetings,” the report says.
The town responded that it adopted a policy for monthly bank reconciliations in June 2019, and said councilors might still receive late financial reports due to limited staff, and a limited number of people who can make bank transactions. It said it will also purchase a loss prevention system from the bank.
The next finding says the town violated the open meetings act through lack of specificity in its wording about closed sessions in a handful of meetings.
The OMA calls for “reasonable specificity” on the agenda with respect to closed sessions.
The town’s response disagreed with the finding: “A letter of caution from the Attorney General does not equate to a finding of violation,” the town said, adding, “We also respectfully disagree that this finding should even be included since it in no way affects or has any bearing on the Town’s financial position.”
The last finding said the town violated its nepotism ordinance in Mayor John Bassett’s reappointment of his first cousin to the planning and zoning commission.
The town’s response again disagreed with the finding, saying that the nepotism ordinance applies to the initial appointment, and noting that the person in question resigned from the commission in November 2019.
Discussion on the audit ran in Edgewood’s well-trodden lines of disagreement between councilors Jaramillo and Abraham and the rest of the governing body.
Councilor John Abrams made a motion to accept the audit report, seconded by Holle. The vote was Abrams and Holle in favor of accepting the report, and Abraham and Jaramillo against. In the event of a tie on the council, the mayor breaks the tie; Bassett voted yes and the motion carried.
A second report at the meeting was from the town’s new wastewater operator, Larry Hall of Aqua Environmental Services, Inc.
Hall’s first visit to the plant was January 13 of this year, and his report said that he saw “several items that greatly concerned me” and he said that led to him “ensur[ing] no re-use watering will take place until the plant can be properly assessed and I am certain that we are meeting all of the current permit requirements.”
The town is moving to encumber funds for ongoing work at the wastewater treatment plant, with work expected to come in around $900,000.
Donzil Worthington of the engineering firm Bohannon Huston said the town had been very successful in getting a loan and grant combination for funding, with funding totaling about $1.5 million in place. “We’re moving aggressively to get that moved forward,” Worthington said.
The state legislature is holding a special session this month and is expected to “claw back” funding that has been allocated but not encumbered or used yet.
Hall outlined actions he has taken since starting, including replacement of membranes in the system, creation of a cleaning system for those membranes to extend life, and replacing UV disinfection with a powerful bleach product.
Councilors Sherry Abraham and Audrey Jaramillo asked about the release of wastewater and whether it represents any danger to the public. Hall said it was done according to the discharge permit, and added, “There is no public health issue, in my view. … Chlorine is a very effective disinfectant.”
Hall’s report concludes by saying, I have been in the Wastewater, Drinking Water, and Laboratory business for over 30 years and I am very serious when it comes to doing things the correct way and ensuring permit compliance and public health.”