2020 Sept 5 ISSUE – THAT ‘EXTRA’ $4.7 MILLION IS OURS! NOW, WHAT TO SPEND IT ON?

It’s only cost something over $35,000 thus far, plus many hours of labor by Village Administrator Ron Curry and Finance Officer Reyna Aragon, but it has been confirmed that most of the unexpected $4.7 million in the Village coffers first announced in January 2020, is legit.

A forensic audit this summer has confirmed that Village government really does have available more than $4 million that turned up unexpectedly. During the January 14 Village Council meeting, Curry told the mayor and council that “What made this jump out to us is that when you look at that amount of money, it is equivalent to our budget for one year.  It is a good problem to have, but it definitely requires us doing due diligence. We don’t want to get into a situation where we owe that money if we spend it in the wrong way.”

Aragon noted at the time that “We do not yet know where it came from. In 2016, we see from Wells Fargo, general cash for $4 million going into an investment account. That’s all we know about it so far.” Later in the meeting Mayor Jo Anne Roake underscored that, saying,“We aren’t going to spend any of it until we have a better idea, and just not that we have a healthy investment account at this point.  I think healthy skepticism is good at this point. It is just very unexpected.”

The Albuquerque forensic accounting company The McHard Firm was chosen to take a deep dive into Village finances. McHard was suggested to Curry by bond attorney Jill Sweeney, who brought them on board after a pandemically-determined virtual interview, just as COVID-19 was taking hold in New Mexico. In a July 20 report to Curry, McHard wrote: “We were contacted by the Village in April of 2020 regarding fund balances of unknown sources, specifically the balance in the LGIP account, and concerns with the structure of the Village’s accounting system.” LGIP stands for local government investment pools.

“The Village underwent a change in several key positions in late fiscal year 2019 and early fiscal year 2020, including turnover in the Village Administrator and the Finance Director positions. As a result of this turnover, and due to lack of communication and/or documentation from the outgoing staff during the transition, the Village became aware it held a balance in the LGIP of approximately $4.7 million.” (Local government investment pools are mutual funds set up by governments for investing excess money. LGIPs are sponsored and organized by the state treasurer of a state or a governing body like a county commission.)

As of 2019, the $4 million figure was recorded as $4,739,585. “The Village Administrator, the Finance Director, and the Village’s Bond Counsel all had concerns that this balance may be restricted and should not be spent. We performed analysis regarding the origins of this balance which included fiscal years 2013, 2014, 2015, 2016, 2017, 2018 and 2019.” Both Curry and Aragon came to work for the Village in July of 2019. And, as Curry put it, it all began as “Reyna was starting on the budget for the year. She saw a statement, and was cautiously surprised.”

“How does something like that happen?” they asked themselves. “We mentioned it to some of the councillors, who wondered if maybe the previous mayor had moved money around.” Curry said he and Aragon were “determined to clearly identify the money.”

“It was like looking under rocks,” as Curry put it, “ Trying to make sense of things. Not that the situation was anyone’s fault, but the budget was not getting spent.” The July summation from McHard continues: “In addition to the LGIP balance, the Village is in the process of transitioning its accounting system from MIP to Tyler MUNIS.”

Yet another complication, shifting to an entirely new accounting system. The new one, MUNIS, based in Plano, Texas, aims to “Connect your organization with Munis, the powerful ERP solution designed to encompass a wide range of public sector needs.” ERP means “enterprise resource planning.” The old one, MIP, is an accounting platform aimed at non-profits and governments. In fact, former Mayor Scott Kominiak began the transition to MUNIS, but the effort stalled. Village Clerk Aaron Gjullin has been helpful in restarting that transfer, according to Curry. The McHard report adds, “The Village wants to ensure that the accounting structure is appropriate for transition to the new system, and that the new system will facilitate accurate and timely financial reporting to the Village Council.”

To summarize the general accounting setup, McHard explains, “the Village has held an account with the LGIP for the entire time period we analyzed. The Village also holds a checking account named ‘general fund’ at Wells Fargo Bank and a savings account at Wells Fargo Bank. The ‘general fund’ checking account includes balances belonging to other funds of the Village as well as the Village’s general fund. Based on analysis of these balances over time, the balance in the ‘general fund’ checking account grew each fiscal year from 2013 to 2016. In fiscal year 2017, a portion of the balance in the ‘general fund’ checking account was moved to the savings account held at Wells Fargo.”

It does appear that the Village administration was on disorganized ground in 2013, even before Kominiak became mayor, according to Curry. “There was no solid infrastructure, little ‘good practices,’ and the mayor did not even have an office.” Soon after the “missing” $4 million was made public, an Albuquerque TV station ran a brief segment that according to Curry, “was flippant in nature, 180 degrees away from what we had discussed in the interview, making light of how we would spend the money.” Understandable to any kid who found an unexpected crumpled $20 bill in her shorts, when out of allowance money, perhaps.

Under the rocks Curry and Aragon turned over they discovered unusual numbers of Village “funds,” several of which had not been touched in four years, and a few with considerable money in them. Here are a few from the list: Recreation – General Ledger Fund 217; Safe Routes to School – General Ledger Fund 220; Recycling Grant – General Ledger Fund 223; Mid-Rio Grande Valley – General Ledger Fund 231; FEMA 4152 – General Ledger Fund 237; Farmland Preservation – General Ledger Fund 305.

Aragon’s current prime focus is consolidating the assorted funds, and making sure there are no encumbrances on the fund balances. As Curry stated, “Handle money as little as you can, yet accurately. We want to be sure that the Village has a clear pathway into the future, well after we are gone.”

The good news is: “Based on our analysis of the Village’s financial statements, performed at the fund level, there does not appear to be any restriction on the balance held in the LGIP account. However, there may be a portion of the balance that should be transferred from the LGIP account to the ‘general fund’ checking account.

“While the accounting system is used to segregate funds to track the different sources of revenues and expenditures, these funds will often share bank accounts. It would be very unwieldy and inefficient for each fund in a government to have its own bank account. As such, the balance in the ‘general fund’ checking account at Wells Fargo is, reasonably, a combination of fund cash balances in the accounting system, or general ledger. “The audit financial statements for 2019 show the general fund only has $3.9 million in total cash. Despite that, all $4.7 million of the LGIP account is allocated to the general fund.”

“Based on our analysis of the general fund’s fund balance and based on documented audit findings, we believe either other funds over-spent their accumulated fund balance and owe money to the general fund or a bank account transfer was needed to cover general fund expenditures. It is also possible that both of those situations exist.”

Financial perfect storm? Imbroglio? Comedy of errors? But, all’s well that ends well. This year’s budget for fiscal 2020-2021, according to Arragon, has been sent to the State, and it is the same as last year. Village income from gross receipts has remained steady at 30 percent even through COVID-19. And money is not a prime issue for this Village, during this money-squeezing pandemic, thanks to lax or improper recording of transfers, dormant bank accounts, overspending, even underspending. But now the rocks have been overturned, new systems will be in place, and Curry and Aragon are on the job.