State Auditor Tim Keller listed Estancia as an “at-risk” local government based on the latest audit cycle.
Estancia Mayor Sylvia Chavez could not be reached for comment for this story.
“During our audit, we found significant, irregularities in Cash,” the report says. “The total cash balance as per the general ledger could not be reconciled with the cash report … This resulted in an unexplained shortage of $33,695 in cash.” The report goes on to note that in the prior year “a decrease by $20,362 was made in the cash accounts.”
According to the state auditor’s website, “at-risk” means one of two things: that the entity filed its audit late, or that “there may be material or pervasive misstatements in the financial statements (adverse opinion) or that there is insufficient basis to form an opinion and any undetected misstatements could be material and pervasive (disclaimer of opinion).”
Estancia falls into the latter category.
According to Keller’s report, Estancia “was unable to provide sufficient evidential matter in support of certain transactions and account balances, as presented in the Town’s financial statements as of and for the year ended June 30, 2015, particularly with respect to the cash balances, capital assets and depreciation of current year activities; specifically for transactions that either did not clear the bank but were recorded in Quickbooks or for transactions reflected on the bank statement but not recorded in Quickbooks.”
The “material weaknesses” described by the auditor include
• The town did not maintain a capital asset listing and related depreciation schedule for its assets.
The town’s response was that it “had not previously maintained an inventory of capital assets and related deprciation,” adding that Estancia is working to update the schedule.
• A lack of internal controls for trial balances.
“The Town utilizes Quickbooks for its accounting software,” the report says. “During our audit, we noted that the trial balance was not classified by fund in order to track revenues and expenditures at the fund level.”
Estancia’s response was that it has purchased a new accounting software program, with implementation expected by the end of the 2016 fiscal year.
• Lack of internal controls in cash disbursements and cash receipts.
“In the test work of Cash receipts, we noted that the majority of the forty (40) transacations, totaling $7,777, tested had no supporting documentation for monies received,” the report says.
It also said that a projected error rate of 68.1 percent, or 794 errors out of 1,165 invoices. The cause, the report says, is “The Town has no internal controls for cash disbursements or cash receipts,” adding, “It is difficult to determine whether the amount of monies received and depositited were intact which can lead to unacounted and untimely deposits.”
The report says Estancia is working on obtaining written policies and procedures for internal control of cash.
• Lack of controls over mileage and per diem.
The report says that seven out of 21 vouchers, totaling $1,070, “were not properly authorized, projecting an error rate of 33 percent. That “could result in excess expenditures over budget,” the report says.
The town is “implementing a new form of travel reimbursements that should aid in the proper reporting of travel,” the report says.
Other less significant findings include a lack of control for contracts and noncompliance with procurement process. The second means “the Town is in violation of state statute regarding procurement,” the report says.
Another finding said Estancia is not in compliance with its own ordinance for collection of unpaid and overdue charges because “management made exceptions to the policy by not turning off the water, waiving the shut off/on fees, or not filing a lien on the property without board approval.”
Another material weakness noted by the report is a lack of controls over payroll, and incorrect employee and employer contributions to retirement funds because “management was unaware of the PERA requirements” for temporary and seasonal employees.
The report and findings are at osanm.org/audit_reports.