Navajo Council approves audit, questions findings

By Kathy Helms
Diné Bureau

WINDOW ROCK — The Navajo Nation Council accepted an audit report Tuesday by KPMG LLP on the Navajo Nation’s financial statements, but not without raising a myriad of questions, including whether it was time to change auditors.
John Kennedy of KPMG presented information on the primary government’s financial statement as well as the single audit, which encompasses the Nation’s federal grant programs and addresses compliance with requirements for administering the programs.

The legislation sponsored by Budget and Finance Committee Chairman LoRenzo Bates covered the reporting year that ended Sept. 30, 2007. The legislation originally was presented during a July 16 special session, but Council lost its quorum and no action was taken.

Kennedy said there was a 14 percent increase in posted audit adjustments. General Fund expenditures exceeded revenues by approximately $25 million, and Grant Fund revenues declined about 8 percent. The good news is the Permanent Fund Balance increased by about $150 million.

“You had over $1 billion in the Permanent Fund Balance at the end of 2007, which is the first time ever you’ve exceeded that threshold,” he said.

The General Fund balance, which tracks such things such as the Undesignated Unreserved Fund balance, stood at $52.7 million in 2007. “It had declined quite a bit through the year,” he said. “You expended more than you had brought in, in revenue.” The UUFB decreased $18,096,358.

The number of findings — or areas of concern — in the audit went from 48 in 2005, to 50 in 2006, and down to 46 in 2007.

“The actual number of findings per program generally are on a downward trend,” Kennedy said.

He commended Child Support Enforcement, Improvement and Repair of Indian Detention Facilities and the Abandoned Mine Land Reclamation programs for having no audit findings..

Kennedy said KPMG is required to audit for 14 types of compliance requirements. “There are a couple here that have a number of findings. One is ‘activities allowed or unallowed,’ which means are you spending money in accordance with the terms of the grant.” There were eight findings under that category.

“We have one finding that has not changed since 1999,” he said, but added that most of the findings reported this year are “relatively fresh.” KPMG plans to file the Nation’s Corrective Action Plans with the federal government by July 31.

Francis Redhouse raised a concern over the audit findings. “There are deficiencies that have been identified since 1999 all the way through 2007. We’re paying a lot of people a lot of money to be held responsible for making corrective actions. They have the power in their hands to ensure that all rules and all laws have been adhered to.

“I’m looking at the controller — you’re the man who sits on top of these big dollars — and I’m looking at the president’s office. I don’t think we have anybody here from the president’s office, and a large percentage of these programs that have been deficient and non-compliant are under the executive branch.”

Delegate Omer Begay Jr. said the audit was not adequate enough for him. “We have had KPMG as our auditor for too many years. As an organization of this size, this magnitude, I believe we should be changing our auditor periodically. I have the suspicion that KPMG may be getting a little lazy on us.

“I believe that at some point in time, Mr. Controller, you need to put a new auditor in place which would be in the best interest of the Navajo people.” He said someone also needs to be held accountable for the deterioration of the Nation’s indirect costs, and encouraged Speaker Lawrence Morgan to “get your whip out and get this investigation on a roll also.”

Delegate Jerry Bodie raised a concern about the listing of total findings by year. “You have a number of findings going all the way back to 1999. These are just numbers. It don’t do me no good to look at these numbers.

“I need names of the departments where all of these findings have been done,” he said. “We don’t know who is responsible for these findings. If you had the names on them it would be worth sitting here listening to it, but otherwise it’s just numbers.”