By Connor Currier
City Councilors seemed surprised last week when their newly-installed City Clerk and Treasurer, Deborah Liu, laid out tens of thousands of dollars in payroll errors and fines levied by the IRS in June against the city.
However, independent auditors have been warning the city’s elected officials and fiscal managers for years that they lacked basic fiscal controls and were at risk of fraud or mismanagement of public funds, audits and documents reviewed by The Independent and nm.news have found.
Repeated Failures
Each of New Mexico’s county and local governments is required to submit to an audit from the state auditor each year to ensure local officials are following best fiscal practices in managing the public’s money. But with more than 1,000 audits to oversee and just a handful of staff in-house, audits of most local governments, including Moriarty, are required to hire outside auditing and accounting firms to review the books each year.
Failing to file an annual audit is a violation of state law, but in practice, little is done to enforce it. In Moriarty, the city failed to submit an audit for Fiscal Years 2022, 2023 or 2024 on time.
That delay likely allowed fiscal mismanagement to go uncorrected and allowed millions in taxpayer dollars to be spent without proper approvals, public notice or, in some cases, without basic receipts from vendors.
In 2023, when the city finally submitted to an audit of its 2022 books, auditors raised serious concerns.
The 2022 audit identified Moriarty’s internal financial environment as fundamentally broken.
Among the reported problems:
- Bank reconciliations were inaccurate or entirely missing.
- Obvious errors were left undetected by management.
- Journal entries from a financial system conversion were input incorrectly, with no review process in place.
- Checks were printed out of sequence, some appearing to be backdated—a practice that undermines transparency and raises red flags for financial manipulation.
- Poor organization of disbursement records made it impossible to determine if payments were accurate or timely.
- Cash activity from the New Mexico Finance Authority (NMFA) was not being reconciled at all.
“The city is unable to determine the completeness, accuracy, classification, and cutoff of cash, expenses, revenues, and capital asset balances,” the 2022 audit stated bluntly.
As a part of the audit process, Brandon Webb, who would be elected mayor later in the year, longtime City Councilor Steve Anaya, and acting City Clerk Jeanette Hendricks participated in an in-person meeting with the auditors on May 3, 2023, where they reviewed the findings and recommendations with the auditors.
In response, the city produced a written plan to “create and implement new purchasing procedures and policies to ensure compliance with NMSA Article 1 – Procurement, 13-1-1 through 13-1-199” by September 2024. They assigned the jobs to the city clerk’s office.
By the time the FY 2023 audit was completed in January 2025, the problem had grown worse.
The 2023 audit revealed that Moriarty had made “no progress” on the 2022 concerns. Random tests of just 25 of the city’s many purchasing transactions found that thousands of dollars had continued to be paid out without invoices or documentation from vendors.
$5 million on police, fire, grants spent without approval
Auditors also found a new problem. In FY 2023, the city had spent over $5 million above amounts approved by the city council in the budget across almost every major budget area, including police, fire, sewer and federal grant programs.
In addition, city bank accounts holding more than $850,000 in cash were undercollateralized or uninsured, meaning the city’s funds could be lost if the bank failed.
Auditors put it bluntly in their assessment: “The City is at very high risk of paying fraudulent vendor invoices. The City is at a very high risk of not detecting and correct (sic) instances of fraud, waste and abuse. The City is at high risk of spending restricted resources on unintended purposes, and the City’s general ledger is riddled with errors related to accuracy and classification of expenses.”
The auditor’s records show that the findings and warning were delivered in person on January 9, 2025, to Anaya and also Hendricks, who was formerly in the clerk’s role and, on paper, responsible for implementing the fiscal clean-up plan assigned to be completed by September 2024.
Liu was hired in December 2024, just weeks before that FY23 audit report was shared with officials showing that the city had made no progress on the plan.
In her report to the council in July 2025, Liu told elected officials that the city continues to operate with a significant lack of internal controls, particularly around journal entries and bank reconciliations, both of which are critical components of municipal financial integrity. According to the report, journal entries, essentially the bookkeeping backbone of any accounting system, are being posted without proper documentation or oversight.
