News & Announcements Updates

News & Announcements

September 28, 2017
City-Initiated Fraud Risk Assessment is a Transparent Look at Challenges Facing a City Using Outdated and Often Inappropriate Pr


SANTA FE – Earlier this year, based on observations made by the Finance Director, the City Manager initiated a broad and in-depth fraud assessment into city business functions, policies, procedures and information systems – with a specific focus on identifying systems and practices that put the city at risk for fraud.

The fraud risk assessment extends the city’s continuing efforts to update and professionalize city administrative functions. That effort has been extensive and is ongoing, and includes 1) the purchase of a modern timekeeping and payroll system; 2) the rollout of an Enterprise Resource Planning System that will provide the city workforce with improved software and processes designed around best practices and strengthened policies; and 3) a comprehensive compensation and classification study.

It has also included a top-to-bottom review and re-write of the City’s Debt Management, Investment, and Financial Policies & Procedures, the re-organization of the City’s budget process, and the elimination of problematic past practices that led to the City’s now-resolved structural deficit and Parks Bond implementation problems.


To ensure objectivity and quality attention to detail, the administration contracted the services of a well-respected, independent third party, McHard Accounting & Consulting, LLC, based in Albuquerque, to conduct the assessment.


McHard’s findings confirmed the observations that led senior management to initiate the review: the City is far too reliant on informal practices and badly outdated systems.  These poor practices have been built into the city’s day-to-day activity over decades and are reinforced by a lack of adequate professional training.

The fraud risk assessment did not identify evidence of criminal misdeeds. However, it does recommend further forensic investigations in a handful of instances. There are 62 issues identified, and taken together they indicate the city is at a higher risk of fraud than is acceptable, and much more work will be needed to guarantee that effective and transparent policies are put into place and outmoded systems are brought into the 21st century.


The full report has been added to the City’s Transparency web portal at: (Just below the A-Z Index link.) It was shared with the City Council last night, and is published now in the interest of transparency and a public accounting and conversation about moving forward.


Many of the issues identified were shared with the Finance Director during the course of the assessment, resulting in corrective action that resolved or significantly mitigated the risks. Many of the issues will be alleviated by the major investments the city has already made in technology and process improvements.


But many challenges remain which will require extensive work and focus moving forward. City Manager and Finance Director have laid out a strategy to begin that work immediately. Senior Management and the Governing Body must work together to establish and enforce systems of accountability and expectations for ethical behavior.


The city will begin with a reorganization of the Finance Department, hold personnel accountable where appropriate, and engage expert and independent third-parties for guidance. Those will include the Office of the State Auditor, the State of New Mexico’s Department of Finance and Administration, and firms with expertise in accounting and finance.


Attached to this release and online at the transparency portal, you will find the Finance Director’s Executive Summary of this process, the full and complete report from the third party engaged to conduct the review, and the City’s responses to the issues identified by McHard Accounting and Consulting.


Interviews and in-depth briefings on the contents are available on request.








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