Audit calls for improvements to Ignacio’s financial reporting

The town of Ignacio’s 2019 audit revealed both budgetary strengths and financial mishaps – errors town staff members vowed won’t happen again.

The town ended 2019 with a strong financial position, with growth in its overall budget and debt-free for the first time in 25 years, town staff members said. A period of employee turnover, however, raised questions about its financial checks-and-balances systems, called internal controls. Staff members had to fix multiple errors, including $83,000 of utility bills left temporarily unrecorded, according to a 2019 audit report by Hinton Burdick.

“We have the staff in place, and we have the systems in place. I would be surprised if those things showed up again,” said Tuggy Dunton, town clerk.

Hinton Burdick, which presented the report this week during a town board meeting, asked town staff members to correct some figures for accrued payroll, accounts payable, capital assets and a beginning fund balance. And there was the month of unposted utility billings that needed to be recorded. In some cases, monthly banking reconciliations were three to four months late, likely because of staff turnover, the report said.

The auditors suggested Ignacio review some of its internal checks and balances because of the errors. Because the company was not reviewing the entire internal controls system, other mistakes could exist, the report said.

“The town should continue to improve its internal controls to a level where they will at least identify significant misstatements,” the report said.

During the town board meeting, trustees asked Hinton Burdick about misappropriations because the town has experienced embezzlement in the past. Ignacio’s 2016 case is closed, and the former employee was sentenced.

Durango and Cortez have also faced embezzlement cases in the last two years. Local governments experience 32% of the fraud reported by all levels of government, according to a 2020 Association of Certified Fraud Examiners report.

Hinton Burdick was not concerned about fraud from what it observed during the audit process, said Viktoryia Yahorava, in-charge auditor. It appeared the town’s mistakes were caused by staff transitions and training issues, she said.

During a three-month transition between finance coordinators, Dunton and another staff member shared financial duties on top of their regular tasks and needed more training for their new roles, she said.

“Getting the staff that was needed in place is the biggest thing. That’s made a huge difference,” Dunton said.

Small organizations have limited capacity to add more checks and balances, said Interim Town Manager Mark Garcia.

He emphasized the town’s accomplishments in 2019, particularly the growth in the town’s general fund and its debt-free status.

The town’s overall net position increased from $6.4 million to $7.1 million. Its general fund grew by about $77,000, according to the audit.

“There’s only so many checks and balances you can build in, because you have limited staff,” Garcia said. “We do the best that we can, and I think that we’re doing a good job.”

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