LOS LUNAS—The New Mexico state auditor has expressed concerns about a litany of findings in the annual audit of a local school district.

State Auditor Brian Colón sent a letter to Los Lunas Board of Education members and Superintendent Arsenio Romero highlighting what he called “significant concerns” about findings in the Los Lunas Schools annual audit for fiscal year 2020.

Brian Colon
New Mexico Auditor

The Los Lunas Board of Education recently voted to table approving the audit so they could have more time to review it.

The audit report, completed by Jaramillo Accounting Group, contained eight findings in total, the first of which was a laundry list of potential violations of the Open Meetings Act, state and district procurement code, Inspection of Public Records Act and Governmental Conduct Act.

In his letter, dated March 3, ColĂłn wrote that prompt resolution to the matters is not only necessary, but imperative for the benefit of the district and its students.

Identifying the underlying causes of the issues in the report and working towards implementing a corrective action plan to resolve the concerns is of the utmost importance, ColĂłn noted.

“To ensure timely progress on these matters, please provide a detailed update from the district within 60 days of the date of this letter,” Colón wrote. “The district’s update should include corrective action taken thus far, documentation identified in support of the corrective action taken and status of progress toward resolving the issues raised in the report.”

According to the report, the board of education allegedly violated the OMA by discussing the services of REDW, the firm that conducted a special audit in 2020, during a closed session. The auditors also found the district may have violated the proper procurement process by paying more than $50,000 in legal services to Himes, Petrarca and Fester and $45,000 to REDW — which exceeds the dollar amount that requires the district to go through a competitive procurement process for those services.

“The special audit and legal fees have also cost the district over $100,000 and time and energy which could be spent elsewhere on district priorities,” reads a portion of the audit report.

Another finding stated was that a newly elected board member used his position to drive a forensic audit against a department in the district in which he was not hired.

Former superintendent Dana Sanders filed complaints with the New Mexico Secretary of State, the New Mexico Attorney General, New Mexico Auditor’s Office and the state’s Ethics Commission, claiming board member Steven Otero used the special forensic audit as retribution against the maintenance department for not hiring him in October 2018, according to prior News-Bulletin reporting.

Another finding in the report was the district’s audit committee not being included in the special audit’s entrance and exit meetings, as required by state law. That decision was based on legal advice given to the school board, according to the audit report.

As per state law, school districts must have an audit committee, consisting of two board members, a volunteer that is a parent of a student(s) and a volunteer with a financial background. The superintendent and the school district business manager shall serve as ex-officio members of the committee.

The audit firm recommended creating audit committee charters approved by the school board, which allow the committee to conduct inquiries and internal audits, follow up on corrective actions, follow the audit process, and make recommendations to the board as deemed appropriate.

Stipends were paid for five Title I staff for National Board Certifications through a federal grant that totaled $42,204. However, those funds weren’t supposed to be used in that way, and the district prepared journal entries to move the expenditures to the proper account. The audit report stated the review process was insufficient and if the charges hadn’t been caught, future federal funding could be jeopardized.

The audit report gave recommendations to rectify the matter going forward, such as the program manager reviewing payments with appropriate approval before they are disbursed, the district completing a yearly review to “ensure all federal disbursements are appropriate,” and to complete journal entries prior to an audit to ensure charges are correctly made to federal grants.

The district also had a finding that was repeated and modified from the 2019 audit in regards to allowable costs, reconciliations and approval for federal funds.

The auditors tested two school sites and found the daily meal counts were not reconciled to Federal Edit Check reports on one date. At one of the schools, cash reports did not have sufficient evidence of review as per federal guidelines.

If there aren’t strong internal controls, the report says, the schools’ reimbursements for meals served may not be accurate. The district implemented new procedures in December 2019, meaning the first five months of the year were non-compliant.

When auditors reviewed a random sample of 80 payroll disbursements, they found three checks were related to COVID-19 differential pay to food service staff. Former interim superintendent Walt Gibson approved the additional pay verbally, but there was no formal documentation of the approval.

Six of the disbursements were for substitute teachers. The substitute salary schedule for the 2019-20 school didn’t have documentation of approvals and rates were unchanged from the schedule approved the previous year.

The differential pay approval happened early in Gibson’s transition period, the report noted, and during the COVID-19 pandemic, which caused the lack of formal documentation.

The lack of substitute salary schedule approval appears to be an oversight. Other salary schedules are required as part of the budgeting process, but substitutes are not considered full-time equivalents and are therefore not budgeted.

The auditors recommended the district review policies and procedures related to payroll internal control to ensure all pay is based on rates that have proper approval, and that those approvals are formally documented.

Other findings included the district not making sure if potential awards recipients “have been suspended or debarred” prior to making awards of $25,000 or more for contracts, and that internal accounting processes and procedures have not been updated since 2004.

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