(Santa Fe, NM)—Today, State Auditor Hector Balderas announced the results of a special audit that found serious abuses of public resources and violations of state law at the Bernalillo County Treasurer’s Office. Patrick Padilla served as the County Treasurer for eight years, from January 2005 through December 2012. Manny Ortiz assumed the office in January 2013 and currently serves as the County Treasurer. Among the issues highlighted by the special audit, auditors found over $900 million in investment purchases may not have been in the best interest of the County. Auditors further noted that preferential treatment was given to certain brokers during the County Treasurer’s purchase of investments during fiscal years 2011 through 2013. The special audit also revealed troubling abuses of County resources, including former County Treasurer Padilla’s use of a County employee to run personal errands for Padilla’s private business and family.
“I am deeply concerned that public officials who are entrusted with the investment of public funds violated their fiduciary duties,” Auditor Balderas said. “These violations of law and clear abuses of taxpayer resources are unacceptable,” he added.
During the special audit, auditors tested the County Treasurer’s internal controls and management of investment transactions from the period July 1, 2010 through March 31, 2014. Balderas designated the Bernalillo County Treasurer’s Office for a special audit in November 2013 after his auditors identified significant risks to County funds in connection with the Treasurer’s investment practices. The special audit was performed by Moss Adams LLP, the independent audit firm selected by the County and approved by the State Auditor. The material weaknesses, significant deficiencies and compliance matters identified by the auditors included:
1) Former County Treasurer Padilla placed the County at risk by entering into unfavorable investment transactions. For example, auditors noted one instance where Padilla purchased a zero coupon bond for $5,000,000. Zero coupon bonds do not pay interest during the life of the bond causing prices to fluctuate more than other types of bonds in the secondary market.
2) The County Treasurer’s Office has not established adequate procedures to determine its cash flow needs and did not make prudent investment decisions that maintained the liquidity necessary to meet the County’s daily cash requirement. As a result, the County was forced to sell investments during February, March and April 2014 and experienced a realized loss of $17,082,183.
3) Auditors noted a pattern of preferential treatment given to brokers when purchasing investments during fiscal years 2011 through 2013. Auditors also obtained evidence that former County Treasurer Padilla contacted brokers to contribute to his golf tournament and may have given preference of County investment purchases to the investors who sponsored the tournament. Padilla was the owner of a 501(c)(3) organization that annually organized golf tournaments in order to raise money for upcoming elections.
4) Former County Treasurer Padilla maintained County investment records and files at an off-site location outside of the custody and control of the County. The storage of the files at the off-site location was not a County-authorized storage facility, and Padilla potentially violated state law by removing public records from the County Treasurer’s Office.
5) One County employee performed personal errands for former County Treasurer Padilla on County work time. The errands included picking up supplies for Padilla’s car washing business, transporting Padilla’s grandchild, and driving Padilla and his wife to and from his home, office and the airport for non-County business.
6) County staff stated they were instructed by former County Treasurer Padilla not to notify property owners of any property tax overpayments.
7) Under former County Treasurer Padilla, 128 investment purchase transactions totaling $616,180,000 did not have supporting documentation from the broker for any of the bids. Nearly all of these transactions, totaling approximately $600,000,000 did not have any support for the final bid selected. Under County Treasurer Ortiz, $15,000,000 in investment purchases did not have supporting documentation from the broker for the bids.
Balderas said he will refer the special audit report to government oversight agencies, including the Securities Division of the Regulation and Licensing Department and the Attorney General’s Office. Balderas’ staff and Moss Adams auditors worked closely with the Securities Division throughout the course of the special audit.
The entire special audit report can be accessed on the Office of the State Auditor’s website, athttp://osanm.org/audit_reports/detail/9004.
Information from Office of State Auditor