Editor’s note: this is a corrected version of the print edition, which incorrectly named Blue Sky Builders and Ryan Cordova as the entity with which Northern New Mexico College violated state procurement code. The contract named in the audit is CAP Investors of Los Alamos, with whom Cordova contracted for student housing. The error was in reporting.
Independent auditors determined Northern New Mexico College financial records are in such disarray, it is difficult to determine if the institution’s financial statements have been impacted by former finance director Henrietta Trujillo’s reported theft and misappropriation of about $206,000.
Instead of issuing an opinion on Northern’s 2016 financial audit, Albuquerque-based Jaramillo Accounting Group issued a disclaimer and released the audit Monday. The independent auditors issued the disclaimer because Northern officials failed to, or couldn’t, produce key documents required to accurately issue an opinion.
Altogether, the accountants uncovered more than three dozen findings, many of which illustrate Vice President of Finance Domingo Sanchez’s failure to follow through on his duties as the institution’s chief financial officer.
Sanchez did not return calls for comment.
Of the 37 findings, five were carried over from previous years. The one that stands out the most, is the lack of timely bank reconciliations, which auditors concluded probably facilitated Trujillo’s reported wrongdoing. The bank reconciliation finding has surfaced every year since 2009.
After Jaramillo Accounting Group accountants flagged the finding during the 2015 audit, Northern officials implemented a measure for tracking the reconciliation through an automated process. However, the auditors concluded Sanchez didn’t follow through with his responsibilities.
“While management had implemented an Access database to monitor the bank reconciliations, the Vice President for Finance and Administration did not fully review the bank reconciliations as the control was designed,” Jaramillo auditors wrote in the 145-page report.
Auditors found that besides the concerted effort by Trujillo to obfuscate and impede the reconciliation process, the finding persisted because Sanchez didn’t vigorously review the records as he promised at the end of the 2015 audit.
“The Vice President for Finance and Administration did not perform a thorough review as asserted to the auditors in the prior year,” the report states. “Additionally, the College’s Board and Administration did not follow through on taking swift and strong corrective action on the various past audit findings relating to the internal control system.”
To ensure the integrity of the institution’s bank records, the auditor recommended Northern hire a contractor to reconcile the bank statements with the general ledger, from the time Trujillo started working at the College, to the end of Fiscal Year 2016. The auditors also explicitly recommended Sanchez “be excluded from the cash reconciliation work with the contractor.”
Northern President Richard Bailey couldn’t be reached by press time.
Jaramillo Accounting Group accountants also flagged school officials for failing to manage the inventory. School officials removed $37,000 worth of equipment from the asset list that wasn’t located during the institution’s annual inventory.
Auditors concluded this finding surfaced because school officials failed to properly reconcile the inventory manifest with actual property.
Fresh findings
Auditors flagged Northern for submitting the 2016 audit several months after the Nov. 15, 2016 deadline. They attributed the late submission to Trujillo’s waiting until the last minute to provide documents key to the audit process.
Once examiners reviewed the key documents and discovered several irregularities, they decided to give Trujillo and Sanchez more time to address the irregularities. After a few months passed, auditors again pressed Trujillo for the documents and that is when she allegedly admitted to taking the $206,000.
The late audit finding coincides with the second finding of the 2016 audit: potential fraud, forgery, embezzlement and non-compliance.
Through the course of the examination, auditors learned the business manual was missing the sections that go over much of the information the employees needed to keep the findings from surfacing.
“During the entity-wide internal controls evaluation, we noted that the “Business Office Procedures by Function” manual, approved in 2015, but not updated for 2016, is missing key procedures and certain controls, such as the cash reconciliation process and segregation of duties access,” auditors wrote. “Through further inquiry of the Finance Department, we noted that various staff had repeatedly requested attention and changes without adequate responses from their superiors.”
Procurement
Jaramillo Accounting Group auditors examined eight contracts to determine if they complied with the state’s Procurement Code, which mandates any purchase exceeding $60,000 must go out for competitive bid.
The examination concluded that three of the eight contracts violated the Code.
Northern officials first ran afoul of the Code when it allowed an original $10,000 contract for legal services with the Santa Fe-based law firm of Zamora and Ortiz to grow to more than $72,000. The institution also violated the contract when Trujillo determined that a $148,000 Science, Technology, Engineering and Math (STEM) Program Contract was a “sole source procurement” and didn’t need to go out to bid.
Rounding out the Code violations was an $84,700 expense the College paid to Los Alamos CAP Investors to provide student housing.
Auditors concluded the Procurement Code violations surfaced because Northern officials failed to update policies and spread out procurement duties during staffing shortages.
“The College’s policies and procedures over procurement have not been updated and are conflicting within several different versions,” the auditors wrote. “Additionally, there was a lack of segregation of duties in this position, as the former Director of Financial Services temporarily filled this position for eight months. The former Chief Procurement Officer (CPO) left on October 31, 2015 and the new Purchasing Agent began working at the College on July 1, 2016.”
Regents
The Jaramillo Accounting Group also cited Northern for failing to maintain the statutorily required number of regents. The New Mexico State Constitution mandates that the state’s colleges should be governed by a five-person Board of Regents.
Having the requisite number of regents is paramount to the school’s ability to properly oversee the institution’s needs.
“The College has been addressing substantial changes in operations along with turnover and whistleblower litigation, all of which have caused a material increase in legal fees, settlements, and insurance premiums. The Board must have all positions filled in order to govern effectively,” the report states.
Gov. Susana Martinez nominated a regent to fill the open position, but the legislature failed to confirm the nomination during the 2017 Legislative Session.
Outdated policies and procedures, inadequate controls over sabbatical and annual leave and payroll, and other liabilities, are a few of the findings auditors believe the Board, as the institution’s policy arm, came up short in managing.
For example, auditors concluded that the Board should have had “higher expectations” and done more to prevent former president Nancy Barceló from racking up some 744 hours of non-approved leave, totaling $87,000.
Barceló wasn’t the only one. Interviews with Business Office employees revealed Trujillo was also out of the office more than usual.
It appears Barceló’s absences to attend conferences and Trujillo’s working from home was sanctioned in one way or another — either by contract or oral permission.
To prevent this finding from being repeated, the auditors recommended the Board and administration take a more hands-on approach and strengthen its expectations.
“The College may have been paying for services not rendered,” the report states. “Working away from the College causes a lack of supervision, management, accountability, and likely wasteful spending of resources. The President was allowed by her contract to attend conferences and the former Director of Financial Services was allowed to work away from the College.”
The audit also shows the former president received questionable payments for honorariums, also known as professional services, contrary to the Act. Altogether, two speaking engagements netted Barceló $1,648 in fees.
“The former College President’s contract allowed for budget expenses incurred for professional meetings at local, state, national and international levels to be reimbursed by the College,” the reports states. “It also allowed for reasonable service on boards or committees of other public or educational entities and occasional speaking engagements as an invited speaker. However, per the GCA (Governmental Accountability Act), public employees may not receive payment or honorarium exceeding $100 for speeches.”
Information Technology
Since 2013, Northern officials have paid some $10,679 to rent credit card machines the school hasn’t used for at least four years.
Auditors concluded that the machines are a waste of money and could be used to provide valuable services to the student body.
A review of several Northern employee computer profiles show, for example, that some workers in the Finance Office had functions assigned to them that they didn’t know about.
Giving employees access to information they don’t need to carry out their job descriptions could create an environment for errors and misappropriations, auditors concluded.
View the entire audit document here:
https://www.saonm.org/media/audits/963_Northern_New_Mexico_Community_College_FY2016.pdf