Maverick County Public Facility Corporation 2013 Fiscal Year Audit approved with a Qualified Opinion
By: Jose G. Landa, Copyright 2015, Eagle Pass Business Journal, Inc.
The Maverick County Public Facility Corporation (PFC) held its monthly meeting on Monday, May 11, 2015, and Certified Public Accountant Ismael “Milo” Martinez presented the Fiscal Year End (FYE) 2013 Audit Report to the Board of Directors subject to a qualified opinion instead of a clean opinion, which the PFC Board approved.
The PFC is the Maverick County instrumentality for the Maverick County Detention Center located at the Radar Base on FM 131. The Maverick County Detention Center is a 625 bed prison operated by the Maverick County Sheriff’s Department.
The PFC Board of Directors include President-Commissioner Roberto Ruiz, Vice-President Sheriff Tom Schmerber, Secretary-Commissioner Rosy Cantu, Treasurer Maverick County Human Resources Director Jesus Sanchez, and Board members Maverick County Judge David R. Saucedo, Commissioner Gerardo “Jerry” Morales, and Commissioner Jose Luis Rosales.
Martinez stated that for the FYE 2013 Public Facility Corporation Audit his firm would be issuing a modified opinion due to certain issues that were discovered during the preparation of the audit.
A modified opinion or qualified audit opinions are given for two reasons. The first is scope limitation, which means that the auditor doesn’t have access to enough information, or to relevant information. The second is in the circumstance that there is a departure from applicable financial reporting framework, which may be the result of either an accident or negligence on the part of the client being audited.
Martinez presented the PFC Board of Directors with the main report of financial statements of the Public Facility Corporation, communication with those in charge of governance report, and the Maverick County Detention Center Enterprise Fund.
Martinez noted that these numbers that were being presented had already been incorporated into the Maverick County reports under the 2013 County Audit.
Martinez advised the Board why his firm had issued a qualified opinion for the 2013 PFC audit instead of a clean opinion. “The rationale as to why we have a qualified opinion is because we weren’t able to get appropriate representation from management, primarily the county auditor refused to sign the representation that was required. There were also some contingent liabilities related to the revenue bonds in certain covenants that we couldn’t get a clear determination on where it stands so that generates a contingency. Because of those two things we have qualified our opinion,” said Martinez.
“In our opinion, except the possible effects of the matters described in the basis for the qualified opinion, the financial statements present fairly in all material respects the financial position of the Public Facility Corporation which is a component unit of the County as of September 30, 2013 and with respect to changes of financial position and its cash flow,” said Martinez.
Martinez proceeded to present his report including the audit of all cash accounts,
“We have issued our report in accordance to governmental auditing standards,” said Martinez.
Martinez highlighted there had been a material weakness found under financial reporting in compliance with policies and procedures. Martinez stated that the timeline of getting accounting records was not followed and that they were not able to audit those documents. “We did not get the information until June of 2014,” said Martinez.
“The audit needed to be turned in 120 days after the year ended and it’s been late every year for 2011, 2012 and 2013. The one for September 2014 was due in January and you’re running late again. So again you are out of compliance with the revenue bonds,” added Martinez.
“The standing with the State of Texas has not been corrected. We reported on that for years now. The standing with the Secretary of State needs to be corrected,” added Martinez. Martinez was referring to the PFC corporate charter being forfeited by the Secretary of State and State Comptroller’s Office for not complying with corporation reporting requirements. The result of this is that the PFC has been operating for several years with its corporate charter forfeited several years and exposing Maverick County and its individual Board members to liability for the obligations and debts of the PFC, which runs into the tens of millions of dollars. Despite Martinez’s repeated requests in his annual audits for the PFC Board to correct the forfeited charter, the PFC Board has failed to heed Martinez’s request until this meeting wherein the Board approved to hire Martinez’s company to reinstate the corporate charter at the Texas Secretary of State Office.
Martinez once again blamed the County Auditor for his firm’s limited scope of review and issuance of the qualified opinion, stating his firm had not received the requested financial information on the PFC on a timely manner.
With regard to the actual operations of the PFC, Martinez stated that his firm was also rendering a qualified opinion as to these financial numbers.
“The basis of the qualified opinion is that there were some limitations on scope on getting a good determination of accounts receivables and payables in the related revenues and expenditures. We are going to need more information and follow up on those. Some of the records were not available so we couldn’t determine and we weren’t able to get a representation letter also from the county auditor. That led to our scope limitation. There are contingent liabilities with your payables that still need to be resolved that relate to you prior operator. So once all that is resolved then it can be addressed,” concluded Martinez.
PFC Board President Roberto Ruiz proceeded to the next agenda item that called for the acceptance of the PFC, FYE 2013 audit.
During discussion, PFC Board member Jesus (Chuy) Sanchez asked if these same reports had already been accepted by the Maverick County Commissioners Court under the whole scope of the 2013 Maverick County audit. Martinez replied “The county has accepted the results of these audits.”
“You know it goes back to what Mr. Ruiz was saying and I can’t follow you. I got this right now and I’m sorry I can’t follow you. I’m being honest. Let me just ask in your findings you found some discrepancies and are you recommending some form of actions to be taken in order for those discrepancies to be corrected?” asked Sanchez.
“The findings that are there need to be addressed. As far as getting a system that the records are prepared more timely, the standing with the Secretary of the State that needs to be corrected. And the third one would be if you get the first one done then you will be able to get your audits in on time,” said Martinez.
Sanchez asked. “How is the PFC supposed to know if they are following the timeline that we are supposed to be following?” “Is there going to be any type of assistance from your department or the county in order for this not to happen again?,” asked Sanchez.
Martinez answered that his firm could definitely provide the adjustments and that the process is started sooner.
Sanchez then stated that as a PFC Board of Director that he would like to see the on-goings from the County Auditor’s office.
“I’m basing my question on what I feel I need as a PFC Board of Director to be assured that this is not going to happen again,” said Sanchez.
“I want to be assured that we are moving forward. And as we are moving forward are we taking corrective action on everything. Not criticizing anyone, when you do your presentation you tell us that because of lack of information we can’t do this or we can’t do that. We can’t proceed with the audit and that is the reason that you gave us a qualified opinion,” said Sanchez.
Martinez noted that one of the things that is now happening that wasn’t in the past is that the PFC Board had not been active for most of these years. “There had been very few, if any PFC Board meetings,” said Martinez.
Martinez stated that now a decision has to be taken to establish the proper mechanism to set a fiscal agent to set a corrective plan in place to address the issues stated under his presentation.
Sanchez stated that he would like the PFC Board to take the proper steps to correct these deficiencies and move forward with the PFC.
After discussion, the PFC Board of Directors unanimously voted to accept the 2013 Fiscal Year Ending Audit.
The Public Facility Corporation then went into executive session to discuss agenda item No. 3 regarding the retaining of proper professional services to file reports with the Texas Comptroller’s Office to remedy status of the PFC with the Texas Secretary of State office. The PFC Board consulted with legal counsel Woody Wilson of the Law Offices of Luis R. Vera, Jr. during Executive Session regarding this agenda item.
Once back in open session and under agenda item No.3 the Board voted unanimously in favor of contracting with Martinez Rosario & Company LLP for no more than $3,000 to correct the forfeited corporate charter of the PFC with the Secretary of State Office.
