An audit of the Bernalillo County Treasurer’s Office discovered questionable pay raises, a prohibited campaign contribution and violations of state law and county investment policy, according to a report released Tuesday.
Auditors said their work also turned up numerous problems with record-keeping, among other findings.
State Auditor Hector Balderas said he forwarded the findings to the attorney general and state Securities Division.
The report, he said, showed “consistent failures” to follow the law and other regulations.
“Both the investment environment and the operational environment were much too lax,” Balderas said in an interview.
The county treasurer’s office disputed the findings. The treasurer’s response, contained in the audit report, says no laws were broken.
The audit “was done hastily,” Deputy Treasurer Fidel Bernal said in an interview. “… They didn’t give us enough time to respond to some of these allegations.”
Balderas said the audit took several months and that the treasurer had plenty of time to provide documents and explanations.
The 200-page audit report covers county finances for the fiscal year that ended in June. The bulk of the findings, however, center on the treasurer’s office, not the rest of the county.
For the first half of the fiscal year, Patrick Padilla served as county treasurer, and Manny Ortiz worked as investment officer. The two switched jobs in January, when Ortiz took office as treasurer.
The Journal couldn’t reach Ortiz for comment Tuesday afternoon. Padilla said he hadn’t seen the audit and couldn’t comment.
County Commissioner Debbie O’Malley said the audit “allegations are disturbing and must be taken seriously.”
She is one of the commissioners who, earlier this year, successfully pushed for a vote of “no confidence” in Ortiz.
County commissioners and others say the treasurer’s investment strategy has put the county at risk of losing millions of dollars, depending on market conditions. The county lost about $758,000 in recent months when Ortiz sold bonds at a loss to cover expenses. It has millions more in paper losses – meaning they would be realized if the bonds were sold now.
The county administration says it has made budget cuts to offset lost value.
The audit was conducted jointly by the State Auditor’s Office and a private firm, Moss Adams LLP. In the report, auditors said:
• Two of the treasurer’s top employees received pay raises of 15 percent without proper authorization, putting them at an annual salary of $65,500.
The audit doesn’t identify the employees by name, but Bernal and Chief Deputy Treasurer Isabelle Purcella are the only two people making that much in the office, besides the treasurer himself.
Auditors said one employee signed off on his or her own pay increase and approved a matching increase for the other employee.
The treasurer’s office, in a formal response included in the audit report, said both employees had “ongoing signature authority” and that the salaries were set in accordance with long-standing practices for the deputies of elected officials.
Bernal said he and Purcella received the increases, in 2009, because of action by the Legislature. Their salaries are based on whatever the treasurer makes, he said, and the treasurer’s salary is set by the sate.
“We didn’t give ourselves a raise,” he said. “The state did.”
Auditors said the “rule” that deputy elected officials get matching increases isn’t valid and has been applied inconsistently, based on statements from the county administration and Legal Department.
• Ortiz, as investment officer, accepted a $2,500 campaign contribution in 2011 from a “prohibited source,” a violation of the county Ethics Code at the time, which limited such contributions to $1,000 per election.
The prohibited source was a broker, auditors said.
The campaign contribution came on Oct. 11, 2011, according to campaign reports, the auditors said.
The treasurer’s office purchased bonds from the brokerage firm in July 2010 and again this year, auditors said.
Bernal, however, said the contributor stopped working for the firm months before the contribution was made.
In the formal audit response, the treasurer’s office said, the “donors formed a new company and these individuals and their company conduct no business with Bernalillo County and don’t otherwise” meet definitions of a prohibited source.
Auditors, according to the report, maintain Ortiz “accepted a campaign contribution from a prohibited source because there was not a process in place to identify prohibited contributors.”
• The treasurer’s office deposited about $2.5 million in financial institutions outside the county, a violation of a state law requiring that such deposits be made in banks with local branches.
The treasurer’s office, meanwhile, said it considered the certificates of deposit to be investments because they were traded on the open market, meaning the geographic requirement didn’t apply, Bernal said.
• The county’s investment committee failed to comply with the state Open Meetings Act. There was no evidence of public notice before scheduled meetings, and minutes weren’t kept properly.
In one case, there were two versions of the minutes for one meeting, with a discrepancy between them.
The county treasurer’s office said the investment committee is an advisory body, not a policy-making group, so the Open Meetings Act doesn’t apply.
Auditors said the committee approves investment brokers and handles other work that makes it a public body subject to the Open Meetings Act.
• There was no documentation that the treasurer was involved in obtaining at least two bids for about $128 million in security purchases, a violation of the county investment policy.
The treasurer’s office said bid sheets can be signed by the treasurer or investment officer, not just the treasurer. Regardless, at least two bids were obtained for all investment transactions, the office said.
Auditors said the investment policy requires the treasurer to be involved in obtaining bids.
• Some investment records were kept off-site in Padilla’s personal office, not on county property, among other problems with record-keeping.
Special audit ordered
Balderas said he has ordered a special audit that will take a closer look at investment transactions.
But the findings in Tuesday’s report “show that public officials who are entrusted with taxpayer funds violated their fiduciary duties imposed by state law and county policies,” he said in a written statement.
In an interview, he added: “It was very concerning to me. Anytime you’re dealing with this type of investment operation you want to make sure that laws, rules and regulations are upheld to the highest standards.”