DALLAS -- Ratings on Gallup, N.M., have been suspended after an outside auditor said it was unable to substantiate the city’s account balances and issued no opinion of its finances.

“The rating suspension reflects the lack of an opinion of the city’s fiscal year 2012 audit, its most recent,” Standard & Poor’s credit analyst Jaime Trejo said on Monday. Moody’s Investors Service withdrew its A1 rating on Gallup last month, along with its rating on the city’s utility.

S&P, which rated Gallup’s tax-supported debt A-plus before the suspension, said it may reinstate its ratings after public release and analysis of financial statements that, “in the opinion of an independent auditor, fairly present the financial position of the city.”

With a population of 22,000, Gallup is located on Interstate 40 approximately 20 miles east of the Arizona border. The city, which calls itself “The Indian Capital of the World,” serves as a retail and service hub to an extended area of approximately 200,000 people, including residents of local Native American reservations and the Acoma, Hopi, Laguna, Navajo and Zuni tribes.

The top three employers in the city are Gallup-McKinley County Schools with 1,900 employees, USPHS Gallup Indian Medical Center with 1,700, and Rehoboth McKinley Christian Hospital with 650.

The city’s auditor, Accounting and Consulting Group, Inc., was in its first year of a three-year contract to conduct the state mandated annual financial audit, according to the city.

“The auditors presented an extensive list of findings during the exit conference that will require a great deal of staff effort to correct in the upcoming fiscal years, most in FY 2014,” city officials said in prepared statement. “Many of these findings are very serious and reflect significant accounting issues that have been present going back several years.”

City manager Daniel Dible, after finding anomalies in preparing the 2012-2013 budget, notified the New Mexico Municipal League Self Insurers Fund in June 2012 of  “significant accounting problems” in the FY 2011 Lodger’s Tax Fund that were not mentioned in the FY 2011 Audit, the city said. NMML recommended that the city hire Sweetser Forensic Accounting to conduct an investigation of the Administrative Services Department.

After receiving the Sweetser report, Dible fired the administrative services director in September 2012. The fiscal year 2012 audit was delayed during the hiring of a new chief financial officer.

“The City has been very proactive in its efforts to improve the management of the city’s finances since mid-2011,” officials said in their statement. “It is expected that this proactive approach will lead to much more positive audit findings in FY 2013 and beyond.”

In a 2011 rating on $4.1 million of general obligation refunding bonds, S&P called the city’s financial performance “very strong, in our view, due to the maintenance of a very strong unreserved general fund balance above 30% of expenditures for the last six years.”

“The city closed audited fiscal 2009 with $8.6 million or, in our view, a very strong 38% of expenditures,” wrote analyst Bryan Moore. “In fiscal 2010 (draft audit), the city drew down reserves to end the year with an unreserved general fund balance of $7.4 million, or what we consider to be a very strong 30.0% of expenditures.”

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