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Pearsall councilors learned last week that for the third year in a row the city’s 2019-20 fiscal audit contained an internal control deficiency.
In a presentation to the council, Robert Leal from Leal & Carter, the private auditing firm hired by the city, reviewed the fiscal audit that was subsequently accepted by councilors during the Tuesday, August 24, meeting.
“We had the same finding as last year,” Carter said. “The city did not have control procedures in place. We discussed this with Fred [Reyes, city manager] and he is aware of this issue and going forward plans to monitor these and report on a monthly basis.”
In March 2020, Leal presented the 2018-19 fiscal audit nearly a year after the state-mandated deadline for submission.
It was during that March meeting that former Finance Director Santos Alarcon told councilors the three administrative findings in the 2018-19 audit were related to ‘control issues.’
“I anticipate some of these same control issues for the 2019 audit,” Alarcon said. “I am currently in the closing process for 2019. We have Leal & Carter scheduled to come in April and the 2019 audit should be done by May 30.”
Carter suggested to councilors that whoever the city has tasked with entering closing entries should review them monthly to make sure the entries have been properly entered.
“Essentially what is happening is that it is taking an extensive effort to reconcile the accounts,” the auditor said. “What is happening is not a reconciliation every month so there is an extensive amount of adjustments.”
According to the audit, adjusting entries is necessary in order to properly report account balances for the pooled cash, accounts receivable, inter-fund transfers, fixed assets, depreciation expense and accounts payable.
“The city of Pearsall did not appear to have certain control procedures in place during the fiscal year in order to ensure the pooled cash, accounts receivable, inter-fund transfers, fixed assets, depreciation expense and accounts payable had been reported properly,” the report read.
Reyes told councilors that reconciliations are now happening once a month.
Councilor Julian Hernandez asked why the problem had not been fixed if it was an issue in previous years.
“This is an issue,” Alarcon said. “When we issued our last audit, we were behind. We went through ten months of not reconciling because of the workload I was under. Once Jackie [Zuniga] came, she was able to reconcile and get us caught up.”
Alarcon expects the 2020-21 audit to be ready for submission by December.
“It was and still is an issue from the perspective of the 24-month period when I first came in and I was not able to get comfortable,” Alarcon said. “I am happy with the clean opinion.”
Mayor Ben Briscoe commended the work Alarcon did in his time as the finance director for the city, saying he believes the administration will have the documents ready by the end of the year.