Serving the High Plains
Serving the High Plains
The number of findings in a fiscal-year 2021 audit for financially troubled Mesalands Community College more than tripled compared to the previous year, and the findings were more serious.
The report, released by the New Mexico Office of the State Auditor last week after its submission in early April, contained 17 total findings, including nine material weaknesses (the most serious type), seven significant deficiencies, one material noncompliance finding and three repeated or modified findings. The audit covers the fiscal year that ended June 30, 2021.
That compares to just five findings in the college’s 2020 audit. That one contained no material weaknesses, and the report was an unmodified opinion, the best attainable.
The larger number of findings in the audit wasn’t a surprise.
Mesalands Chief Financial Officer Blanca Pauliukevicius warned the college’s board of trustees earlier this year the report — submitted about 18 months late — would be “awful.” She said the college’s financial records were in disarray, and chronic short-staffing in her office exacerbated the problem.
The college’s deteriorating finances contributed to the resignation of President Gregg Busch in March, prompted the state’s Higher Education Department to place Mesalands under fiscal oversight and led to cuts to the college’s programs and many staffers’ pay.
CliftonLarsonAllen LLP of Albuquerque prepared the FY2021 audit and wrote the FY2020 audit.
Findings in the FY2021 report take up more than 20 pages. Most municipal audits’ findings are just a handful of pages.
Daniel Maki, intergovernmental affairs and outreach director for state auditor, said in a telephone interview the audit reflects the college’s financial turmoil.
“The findings are alarming,” he said.
Ricky Bejarano, the state’s deputy auditor with more than 30 years experience in the field, looked at the audit and said “even one finding” is too many — much less 17.
“I feel for the CFO,” he said, referring to Pauliukevicius. “I know she’s been in that office for only a few months, but this is a huge responsibility. The important thing in this is to turn it around.”
Interim Mesalands President Allen Moss observed Thursday that many of the college’s employees weren’t around during the FY21 audit’s time frame.
“A lot of us weren’t even here at the time … but we still have to answer for it,” he said.
Good reports from an auditor usually are an unmodified opinion. Mesalands’ audit came with multiple opinions from CliftonLarsonAllen, including disclaimers and adverse opinions.
“The College did not have its Vice President of Finance position (or equivalent) staffed on a consistent basis for 15 months,” the audit stated. “Certain other staff positions supporting the accounting function have not been consistently staffed over the same period. As a result, the College fell behind in record keeping during the last part of fiscal year 2021 and accounts were not reconciled during the year and at year end.
“During an extended audit fieldwork period, various kinds of information needed for the audit were not immediately available and other requests for information were not timely provided. The findings section of this report discusses details of these circumstances.”
Amanda Hammer, now a trial court administrative assistant for the 10th Judicial Circuit Court in Tucumcari, was the college’s CFO before she departed in March 2021, shortly before Busch arrived as president. In a phone interview Monday, Hammer said she kept the college’s financial records up-to-date.
“Everything was current,” she said.
After Hammer’s departure, Mesalands had four CFOs — including Pauliukevicius, who arrived last August.
Pauliukevicius said Thursday the college’s business office now has four other employees, and she was hoping to fill at least one more vacancy.
The HED earlier this year issued Mesalands about $763,000 in emergency funds to pay for several audits, beef up the college’s finance department and reactivate the Jenzabar platform in an effort to produce more and timelier financial reports. The college likely will return about $190,000 of those funds (see other story in this edition).
The college also is issuing a request for proposals for auditing services, including the FY22 and FY23 audits. The FY22 audit is about five months late.
The report
The audit issued an adverse opinion on Mesalands’ various student financial aid programs, noting it “did not comply with requirements.”
The audit found a material weakness in internal controls over financial reporting. It stated monthly financial statements and reconciliation procedures weren’t prepared after February 2021.
It also cited “personnel turnover in areas that are necessary to the college operations.”
“The former Vice President of Administration and Finance left the College in April 2021 and the certain operating and financial procedures performed by the finance department including the issuance of financial reports did not continue in a satisfactory manner,” the audit stated.
“There was no backup expertise for financial close and financial procedures needed to produce accurate and timely financial information and various reports for the (Jenzabar) system were not easily accessed as needed. There was no policy in place for continuation of essential services needed in the financial reporting area. Additionally, the College was without a president until the last two months of the year.”
Because of the lack of reports, the audit stated the board of trustees lacked information for decision-making. The lack of financial statements “increased the risk of irregularities.” It also noted “a significant accounting backlog.”
The audit cited a material weakness in bank reconciliation, stating the college was “not current and were months behind” for all accounts and payroll. Even on the day the audit report was submitted, bank reconciliations “are not completely caught up to a current status.”
The report found material weaknesses with with accounting journal entries, general accounts receivable, accounts payable and balance sheet account misstatements, including sick-leave balances for former employees and payouts to terminated employees.
It noted because of the lack of accounts payable data, “there is a possibility that the college may not timely pay its vendors” or receive its grants “due to late or incomplete billing.”
It found errors in the inventory of the college bookstore and Dinosaur Museum store. Mesalands lacked a bookstore manager for an entire year, it stated, and the college also lacked an internet technology position.
The audit found a material weakness with discrepancies in endowment information with the Mesalands Community College Foundation.
It found a material weakness with 16 student refund checks totaling almost $9,500 that’d been outstanding for more than 240 days.
The report detailed a significant deficiencies in verifications, IT safeguards, general ledger items, incorrect or outdated signatories at financial institutions and preparing financial statements.
The auditor discovered many voided checks and gaps in the sequence of checks.
The college failed to report enrollment status changes for nine of 18 students tested by the auditor.
Other observations from the audit:
— The report stated the college paid a previously undisclosed $175,000 settlement with John Groesbeck, who was Mesalands president for about a year until his firing in early 2020. Groesbeck filed a whistleblower lawsuit against Mesalands after his termination. The March 2022 settlement released the college from Groesbeck’s claims.
— It noted the loss of enrollment in the last few years. “We anticipated that growth in expense may outpace revenue growth because of nontuition paying students (dual enrollment and correction) and decreases in state appropriation due to legislative action.” Moss recently announced Mesalands would cut back on dual enrollment offerings due to their expense.
— The report stated an operating loss of more than $8.4 million and expenses outpacing revenue by $3.73 million as of June 30, 2021. The college’s change in net position fell by $2.8 million. More than $4.1 million of the expenses were attributed to pensions.