NMHU audit shows improvement, but issues remain

New Mexico Highlands University had five findings on this year’s financial audit, with several significant issues included. However, this year’s audit resolved several of the 17 findings from last year’s audit, showing improvement within the impacted departments at the school. 

Many of the issues on this year’s audit deal with a lack of adequate document retention and the processing of payroll, as well as keeping proper balances in various accounts. 

All five of this year’s findings are classified as either material weaknesses at the university or significant deficiencies. However, the university outlined a detailed plan to get their finance department back on track moving forward in its audit response. 

Among the major findings:

•The University has not properly designed processes or controls to provide a timely reconciliation of amounts recorded in payroll liability accounts to amounts paid to payroll vendors. A third-party consultant was hired to help with this process, and found $37,508 in overpayments to payroll vendors. 

•Multiple payments to retirement funds, health care premium funds and other elective contributions were made late by the university, including up to 47 days past the month they were due. 

•Forms were not consistently available to auditors when testing paychecks, including missing ERB enrollment forms, missing W-4 forms and missing ACH authorization forms. WIthholdings were also inconsistent in the paychecks observed by the auditors. 

•One employee was paid for two months before they officially began working at the university, resulting in an overpayment of $4,948. Other overpayments also occurred throughout the fiscal year.

•Payroll reconciliations were not done in a timely manner, with the reconciliation for June 2022 not being finalized until October 24, 2022. 

•The use of university vehicles was not reflected as taxable income on W-2 forms, impacting two employees. 

•297 university assets, totaling $2,803, were not located during a check of the university’s inventory.

•Auditors were provided with an incorrect report of compensated absences, and subsequent reports also contained errors and discrepancies. 

•Price quotes were not properly obtained for purchases made between $10,000 and $20,000, resulting in $43,747 in questioned costs, as the university was unaware the threshold had been lowered at which quotes must be obtained. 

NMHU issued a lengthy response to its audit findings, explaining how it intends to resolve many of the issues raised. 

The university explained that it discovered that its HR and payroll departments had issues that needed attention at the end of the 2021 fiscal year, and those issues persisted into the 2022 fiscal year. The issues mainly stemmed from staff turnover and a lack of understanding of the payroll system. The school also said its progress was hindered by the Hermit’s Peak/Calf Canyon Fire toward the end of the Fiscal year. 

They said the challenges allowed them to establish a plan moving forward that they believe will get things back on track. This includes:

•Hiring new leaders and filling all vacant positions, which they said was completed as of October 2022. 

•Retrain all employees on the necessary systems so everyone is aware of their expectations.

•Outsource vendor payment functions to Moss Adams, the NMHU internal auditor.

•Outsource payroll functions to a third-party vendor. The RFP has been issued for this, and they expect it to be complete in the third quarter of FY 2023.