The Bernalillo County Treasurer’s Office will undergo a special audit because of troubling findings with county investments, including how the office conducted bids on bond investments.
State Auditor Hector Balderas said in a letter to county officials Wednesday that the county’s annual audit disclosed problems in the Treasurer’s Office investments and management.
Balderas said that based on the preliminary findings the special audit was needed to address “the troubling risks to County funds in fiscal years beyond 2013.”
“I believe a special audit is essential to improving the County Treasurer’s internal controls and management related to the county’s investment transactions,” he wrote.
The state auditor’s letter is the latest in a series of problems for the office of Treasurer Manny Ortiz and his investment officer, former Treasurer Patrick Padilla, including concerns over how investments were chosen and how much brokers were paid.
County finance officials say Ortiz and Padilla are refusing to acknowledge that both actual and paper losses have put the county in a serious cash crunch that could require delaying some planned expenditures. They say the county’s investment portfolio has actual losses of almost $800,000 and paper losses of $17 million as of Nov. 7, which they attribute to the treasurer’s policy of putting the county’s money in long-term bonds.
Ortiz and Padilla have defended their bond investments, claim they have made money for the county and insist there will be plenty of cash on hand to meet obligations as new property tax payments roll in.
Bernalillo County officials don’t know how much money bond brokers dealing with the Treasurer’s Office were paid in commissions on hundreds of millions of dollars in bond deals.
County officials were unable to provide any documents about the commissions in response to a Journal request under the Inspection of Public Records Act for records showing bids and commissions transaction records.
“The auditors have the documents at the Treasurer’s Office, and we don’t have them in hand,” said county spokesman Larry Gallegos. “We were told not to interfere with the auditors so our hands are tied.”
The Auditor’s Office previously complained to county officials about interference in getting information from the employees at the Treasurer’s Office.
Broker fee dispute
The commissions paid on bond purchases and sales are one of many issues in dispute between county officials and the state Department of Finance Local Government Division, which has made a series of recommendations to the county to add “transparency” to the Ortiz bond dealings.
Wayne Sowell, director of the DFA’s Local Government Division, said in a telephone interview that Ortiz has been unable to answer basic questions on how his office decides which bonds to buy.
“Among other things, we’d like to see how much the bond salesmen are making,” Sowell said.
In letters to Ortiz, Sowell said there is inadequate disclosure and oversight of brokers who have been approved to do business with the Treasurer’s Office.
Ortiz has not responded to requests for interviews and has been unavailable to answer questions for more than a week.
Sowell suggested the county invest in an electronic trading platform, which would allow the treasurer to seek and receive several more bids simultaneously and to document bidding results with greater transparency.
“You could put the bids on a website, if the county wanted,” Sowell said. “It would be a very good expenditure of money considering the county has a portfolio of $275 million.”
Padilla said the commissions should be on the bid documents on each bond sale, along with other information like the cost and maturity dates of the bonds.
“Those records are in the Treasurer’s Office,” Padilla said. “I don’t have them.”
Ortiz did not explain the bid process at meetings with other county officials.
But Padilla, who was treasurer for two terms prior to Ortiz taking office this year, said in a telephone interview that the bid process was fairly simple.
“I would call three or more brokers and tell them we were in the market for bonds,” he said. “They would send us bids by email.”
Padilla said he would then take the bids to Ortiz, discuss them, and Ortiz would choose which bid to accept.