Audit in, freeze off

The Archuleta County Board of County Commissioners received the 2007 government audit Monday, and with its completion, the state auditor has released the freeze on the county’s property taxes.

The state auditor’s office imposed the freeze November 2008, after the county failed to meet the audit submittal deadline of July 31, 2008. Although Archuleta County Finance Director Don Warn anticipated the freeze after auditors with the firm Wall, Smith, Bateman & Associates said they would be delayed in returning to the county to complete the 2007 audit by the state mandated deadline.

Wall, Smith, Bateman & Associates conducted the county’s 2006 audit, and due to the arduous nature of the project, their timetable was pushed back, both in returning to Archuleta County to conduct 2007 and in meeting their obligations to other clients.

Although property tax freezes are never a desirable circumstance, Warn said the timing of the most recent freeze was liveable because property tax collections were almost complete by the time the freeze was imposed. Knowing the freeze was imminent, Warn’s next target was to have the audit to the state before Jan. 1, 2009 and Warn reached his goal.

Archuleta County Treasurer Kelly Evans announced the lifting of the freeze Dec. 19.

According to documentation provided by Wall, Smith, Bateman & Associates, county accounting showed incremental improvements in 2007, this time with a “qualified opinion,” rather than a “disclaimed opinion.” Nevertheless, the report shows the organization continued to struggle in the throes of the financial meltdown, with negative fund balances, poor record keeping, insufficient documentation and internal controls, violations of state statute and failures to conduct account reconciliations. However, Wall, Smith & Bateman accountant, Karla Willschau lauded recent improvements, in staff, policy and procedures and said the county was clearly on the road to recovery.

“There were a lot of weaknesses that were inherent in the system at the start of 2007.” But, Willschau added, “This is a long way from a disclaimed opinion like you had the last two years. This is major progress. I think you are really on the right track now.”

Chief among the firm’s concerns in the 2007 books were revenue and expenditure issues in the Human Services Fund and a failure to reconcile the same fund for 2007.

Although Warn acknowledged the problem, he said county staff has taken steps to rectify the reconciliation issue, and Human Services Director Erlinda Gonzalez will provide a status update in her next report in early 2009.

Warn said reconciliations in the Human Services fund had been completed back to July 1, 2007.

The second key issue was noted in the Airport Fund.

According to Willschau, the county didn’t have sufficient evidence to support $5.11 million recorded as “construction in progress” at the airport.

In response to airport fund and other audit issues, Warn drafted a corrective action plan that includes special oversight by him, the county’s special projects manager and the contracts and procurement officer to ensure accurate record keeping and compliance with federal regulations.

Although the county has struggled with late audits since audit year 2003, Warn and Willschau say the 2008 audit will mark a major turning point.

Specifically, staff in Willschau’s firm now have a history with Archuleta County’s fiscal peculiarities, and much of the learning curve is behind them. That, coupled with Warn maintaining a finger on the pulse of county finances and continued oversight from the Citizen’s Financial Advisory Task Force, it appears many of the county’s lingering accounting problems have been identified, and have been, or are in the process of, being rectified.

For example, the county hired a contracts and procurement officer, instituted a cash handling and document retention policy, and eliminated a series of negative fund balances in May with an interfund loan from the Road Capital Improvement fund. The negative fund balances dogged the county ledgers since 2005 which made balancing the books a daunting, if not impossible task.

Although the financial issues reported during Willschau’s presentation were disconcerting, and because audit reports are always presented a year after the fact, the presentation went much like a history lesson — history key players in the organization are well aware of and have taken steps to correct.

That said, Warn and Willschau are looking toward a future where audits are done in a timely manner, thus giving county staff and the board the information necessary to keep the county solvent.

According to Willschau, 2008 may mark the first such year since the county’s financial crisis began.

“I do believe we are in the position to get to this audit (2008) early in the year,” Willschau said.