The 2019-20 fiscal year audit for Valencia County was approved unanimously by commissioners last month.
The audit firm of Kubiak, Melton and Associates performed the regular financial check for its first time with the county, said auditor Daniel Trujillo.
“This was a very odd year due to the pandemic. The county was very amenable to remote work since we were trying to keep county employees and ours safe,” Trujillo said. “Some of the items we think need to be corrected, we were able to meet with (county finance director) Loretta (Trujillo) and they were able to correct them.”
The county received an unmodified audit for the previous fiscal year, which is the best finding an agency can receive.
During the audit, material differences were noted between the county’s cash balance according its the general ledger and the treasurer’s report of June 30, 2020.
A net adjustment of $7.2 million was proposed to tie the cash reflected in the ledger to the cash in the report. The discrepancy happened because the treasurer’s office and finance office didn’t reconcile on one day — May 31, 2020 — of treasurer cash activity into the general ledger.
This resulted in the county cash not being properly allocated to multiple funds, which caused over- and understatements in various county funds’ cash and revenues.
To prevent this from occurring in the future, there will be daily downloads from the treasurer’s system to the finance department’s system.
“Both departments will develop a system to ensure these end-of-month transactions are appropriately recorded/tracked,” the county’s response in the audit report read. “Additionally, the two departments will work together to reconcile total pooled cash to total pooled cash allocated on a monthly basis.”
A finding that was repeated and modified was the county’s capital assets.
“The county owns a lot of buildings, equipment, vehicles,” said Trujillo. “This is on your radar and we know you are working to rectify it. It’s a bit of a heavy lift but I think you’re getting there.”
The county hired its current accountant mid-fiscal year, so she concentrated on identifying and capitalizing new assets acquired, and is still working on cleaning up the problems with assets reporting and disposition that occurred prior to her hire, the county’s response reads.
“The Accountant will … train management and applicable staff on what changes need to be made in order to eliminate the problems with reporting in the proper period, ensuring assets are being disposed of appropriately through the finance department or with the oversight of the finance department,” the response continues.
A second finding found that due to the county being required to group funds differently than in previous years, there was a restated fund balance for the general fund. County management re-evaluated how funds are grouped and adjusted the groups to correct the restating balance issue.
A repeat and modified finding showed the county had a deficit budget totaling $1,208,944 in excess of available cash balances in three funds — series 2015 revenue bonds, gross receipts and federal grants for fiscal year 2015.
The deficits occurred because the county didn’t monitor its budgets to make sure cash was available in the funds, and the audit report noted the budget should be reviewed to ensure all funds have adequate cash balances.
“The county should work with the (Department of Finance Administration-Local Government Division) and its assigned budget analyst in order to ensure that available cash reported to DFA matches the cash balances in the audited financial statements,” the report advised.
The county responded that DFA does not allow for entities to report a negative fund balance when submitting quarterly reports.
Because several funds from the county’s software system are combined as a total into DFA’s reporting system, it is impossible to capture a negative fund balance to any specific fund when reporting to DFA; often the combination of funds carry enough money to avoid negative fund(s) reported, the response read.
“The county will begin monitoring each of our funds separately each quarter to ensure this does not occur in the future,” management’s response continued. “Adjustments to fund balances for the above funds will be made accordingly.”
A third and new finding showed the county reimbursed an employee the incorrect rate for travel expenses for a 24-hour period. The county will provide proper training to make sure the problem doesn’t occur again.
The audit also found the county over spent it’s recreation budget by $1,960. The county’s response indicated it would be more diligent in making budget adjustments to address negative budget balances.
There were also improper year-end accruals found by the auditor. Two out of 47 tested transactions were not properly accrued as accounts payable, according to the report. The two transactions totaling $93,750 were not identified and recorded in the correct period in which the goods or services were received.
It is the county’s practice to run separate accounts payable batches in July for expenses associated with the previous fiscal year versus expenses associated with the new fiscal year in an effort to produce an accurate accrual list for auditors, the county’s response read.
“Internal training will be provided to the accounts payable clerk so she can become more cognizant of the importance of identifying these transactions and ensure she properly creates the (accounts payable) accrual list prior to submitting to auditors,” it continued.
During the audit, Loretta Trujillo said there was a tough but good dialogue between staff and the auditor.
“This shows what we’re doing wrong and what we need to improve on,” she said.