New
Mexico Register / Volume XXIX, Issue 24 / December 27, 2018
NOTICE OF HEARING AND PROPOSED RULES
The New Mexico
Office of the State Auditor proposes to amend the following rules:
Audit Act 12-6-5 Section NMSA 1978
2.2.2.7 through 2.2.2.16 NMAC et seq., (“Audit Rule”).
The Office of the State Auditor is in the process of amending
2.2.2.7 through 2.2.2.16 NMAC et seq.,
(“Audit Rule”). The Audit Rule
establishes policies, procedures, rules and requirements for contracting and
conducting financial audits, special audits, attestation engagements,
performance audits, and forensic audits of governmental agencies of the state
of New Mexico, and is governed by the Sections 12-6-1 to 12-6-14, NMSA 1978
(“Audit Act”). The amendments to the
Audit Rule are proposed pursuant to the Audit Act, Subsection A of Section
12-6-3 NMSA 1978.
Proposed amendments to the rule pertain to the following
items: elimination of certain electronic schedules to OSA, added summary of
audit results, added monetary consequences for failure to meet with governing
authority, changed response time for agencies to respond to OSA, added
requirement to evaluate other intergovernmental agreements reported as agency
funds and made other minor changes.
Copies of the proposed amendments to the rule are available
at the Office of the State Auditor, 2540 Camino Edward Ortiz, Suite A, Santa
Fe, New Mexico 87507 and on the Office of the State Auditor website,
http://www.osanm.org. The Agency will
consider adopting the proposed new rule at a public hearing on February 4, 2019, which will take place at 1:30 p.m.
at the Office of the State Auditor, 2540 Camino Edward Ortiz, Suite A, Santa
Fe, New Mexico 87507. Public comment is
allowed at the public hearing on February 4, 2019 or prior to. Please mail or deliver written comments on
the proposed new rule to: C. Jack
Emmons, Deputy State Auditor, at the Office of the State Auditor, 2540 Camino
Edward Ortiz, Suite A, Santa Fe, New Mexico 87507, or by email at
Jack.Emmons@osa.state.nm.us between December 27, 2018 and February 4, 2019. All written comments received by the agency
will be posted on www.saonm.org no more than 3 business days following receipt
to allow for public review.
If you are an
individual with a disability who is in need of a reader, amplifier, qualified
sign language interpreter, or any other form of auxiliary aid or service to
attend or participate in the public hearing, please contact Frank Valdez at
least one week prior to the public hearing or as soon as possible. Public documents can be provided in various
accessible formats. Please contact Frank
Valdez at 505-476-3841 or Frank.Valdez@osa.state.nm.us
if a summary or other type of accessible format is needed.
A. “AAG GAS” means
AICPA Audit and Accounting Guide - Government auditing standards and Single
Audits (latest edition).
B. “AAG SLV” means
AICPA Audit and Accounting Guide - State and Local Governments (latest
edition).
C. “Agency” means
any department, institution, board, bureau, court, commission, district or
committee of the government of the state, including district courts, magistrate
or metropolitan courts, district attorneys and charitable institutions for
which appropriations are made by the legislature; any political subdivision of
the state, created under either general or special act, that receives or
expends public money from whatever source derived, including counties, county
institutions, boards, bureaus or commissions; municipalities; drainage,
conservancy, irrigation, or other special districts; and school districts; any
entity or instrumentality of the state specifically provided for by law,
including the New Mexico finance authority, the New Mexico mortgage finance
authority, the New Mexico lottery authority and every office or officer of any
entity listed in Paragraphs (1) through (3) of Subsection A of Section 12-6-2
NMSA 1978.
D. “Audit” means [both]
annual financial and compliance audits,
special audits, attestation engagements, performance audits, forensic audits
and agreed upon procedures, unless otherwise specified.
E. "Auditor" means independent public accountant.
F. “AICPA” means
American institute of certified public accountants.
G. “AU-C” means U.S. auditing
standards-AICPA (Clarified)
H. “AUP” means agreed upon procedures.
I. “CPA” means certified public
accountant.
J. “CPE” means continuing professional
education.
K. “DFA” means the New Mexico department
of finance and administration.
L. “ERB” means the New Mexico education
retirement board.
M. “FCD” means financial control division
of the department of finance and administration.
N. “FDIC” means federal deposit insurance
corporation.
O. “FDS” means financial data schedule.
P. “GAAP” means accounting principles
generally accepted in the United States of America.
Q. “GAGAS” means the most recent revision
of government auditing standards issued by the comptroller general of the
United States (yellow book).
R. “GAO” means the
government accountability office, a division of the OSA.
S. “GASB” means governmental accounting
standards board.
T. “GAAS” means auditing standards
generally accepted in the United States of America.
U. “GSD” means the New Mexico general
services department.
V. “GRT” means gross receipts tax.
W. “HED” means the New Mexico higher
education department.
X. “HUD” means United States (US)
department of housing and urban development.
Y. “IPA” means independent public
accountant.
Z. “IRC” means internal revenue code.
AA. “LGD” means the local government
division of department of finance and administration (DFA).
BB. “Local
public body” means a mutual domestic water consumers association, a land
grant, an incorporated municipality
or a special district.
CC. “NCUSIF” means national credit union
shares insurance fund.
DD. “NMAC” means New Mexico administrative
code.
EE. “NMSA” means New Mexico statutes
annotated.
FF. “Office” or “OSA” means the New Mexico office of the state auditor.
GG. “OMB” means the United States office of
management and budget.
HH. “PED” means the New Mexico public
education department.
II. “PERA” means the New Mexico public
employee retirement association.
JJ. “PHA” means public housing authority.
KK. “REAC” means real estate assessment
center.
LL. “REC” means regional education
cooperative.
MM. “Report” means
document presented to management or the governing authority regardless of
whether the document is on the contractor’s letterhead or signed by the contractor.
[MM] NN. “RSI” means required supplementary information.
[NN] OO. “SAS” means the AICPA’s statement on auditing standards.
[OO] PP. “SHARE” means statewide human resources accounting and management
reporting system.
[PP] QQ. “SI” means supplementary
information.
[QQ] RR. “State auditor” may refer to either the
elected state auditor of the state of New Mexico, or personnel of his office
designated by him.
[RR] SS. “STO”
means state treasurer’s office.
[SS] TT. “Tier”
is established based on the amount of each local public body’s annual revenue,
pursuant to Section 12-6-3 NMSA 1978 and Section 2.2.2.16 NMAC.
[TT] UU. “UFRS” means uniform financial reporting standards.
[UU] VV. “Uniform guidance” Title 2 U.S. Code of Federal Regulations Part
200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards.
[VV] WW. “U.S. GAO” means the United States government accountability
office.
[2.2.2.7 NMAC -
Rp, 2.2.2.7 NMAC; A, xx/xx/2018]
2.2.2.8 THE
PROCUREMENT AND AUDIT PROCESS:
A. Firm profiles: For an IPA to be included on the state
auditor’s list of approved firms, an IPA shall submit a firm profile online
annually on January [5th] 7th or on the
next business day, in accordance with the guidelines set forth herein. The OSA shall review each firm profile for
compliance with the requirements set forth in this rule. IPAs shall notify the state auditor of
changes to the firm profile as information becomes available. The state auditor shall approve contracts
only with IPAs who have submitted a
complete and correct firm profile that has been approved by the OSA, and
who have complied with all the requirements of this rule, including but not
limited to:
(1) Subsection
A of Section 2.2.2.14 NMAC, continuing professional education requirements for
all staff that the firm will use on any New Mexico governmental engagements;
(2) listed
professional service contracts the firm entered into;
(3) for
IPAs who have audited agencies under this rule in the past, they shall have
previously complied with: Section 2.2.2.9 NMAC, Report Due Dates, including
notifying the state auditor regarding late audit reports and Section 2.2.2.13
NMAC, review of audit reports and audit documentation.
B. List of approved firms: The state auditor shall maintain a list of
independent public accounting (IPA) firms that are approved and eligible to
compete for audit contracts and agreed upon procedures engagements with agencies. The state auditor’s list of approved firms
shall be reviewed and updated on an annual basis. An IPA on the list of approved firms is
approved to perform government audits until the list of approved firms is
published for the following year; provided that the OSA may restrict firms at
any time for failure to submit firm profile updates timely. An IPA that is included on the state
auditor’s list of approved firms for the first time shall be subject to an OSA
quality control review of the IPA’s working papers. This review shall be conducted as soon as the
documentation completion date, as defined by AU-C Section 230, has passed (60
days after the report release date). The state auditor shall approve contracts
only with IPA firms that have submitted a complete and correct firm profile
complying with all the requirements set forth in this rule and that has been
approved by the OSA. The OSA shall
inform all IPAs whose firm profiles were submitted by the due date whether they
are on the list of approved firms and shall publish the list of approved firms
concurrent with notification to government agencies to begin the procurement
process to obtain an IPA to conduct the agency’s annual financial audit.
C. Disqualified firms: An IPA firm
shall not be included on the list of approved firms if any of the following
applies to that IPA:
(1) the
firm received a peer review rating of “failed”;
(2) the
firm does not have a current New Mexico firm permit to practice;
(3) the
firm profile does not include at least one certified public accountant with a
current CPA certificate who has met the GAGAS CPE requirements described at
Subsection A of Section 2.2.2.14 NMAC, to perform GAGAS audits;
(4) the
IPA has been restricted in the past and has not demonstrated improvement (this
includes submitting excessively deficient audit reports or having excessively
deficient workpapers);
(5) the
IPA made false statements in their firm profile or any other official
communication with the OSA that were misleading enough to merit
disqualification; or
(6) any
other reason determined by the state auditor to serve the interest of the state
of New Mexico.
(1) IPAs may be
placed on restriction based on the OSA’s review of the firm profile and
deficiency considerations as described below.
Restriction may take the form of limiting either the type of engagements
or the number of audit contracts, or both, that the IPA may hold. The OSA may impose a corrective action plan
associated with the restriction. The
restriction remains in place until the OSA notifies the IPA that the
restriction has been modified or removed.
The deficiency considerations include, but are not necessarily limited
to:
(a) failure to
submit reports in accordance with report due dates provided in Subsection A of
Section 2.2.2.9 NMAC, or the terms of their individual agency contract(s);
(b) failure
to submit late report notification letters in accordance with Subsection A of
Section 2.2.2.9 NMAC;
(c) failure to
comply with this rule;
(d) poor quality
reports as determined by the OSA;
(e) poor quality
working papers as determined by the OSA;
(f) a peer review
rating of “pass with deficiencies” with the deficiencies being related to
governmental audits;
(g) failure to
contract through the OSA for New Mexico governmental audits or agreed upon
procedures engagements;
(h) failure to
inform agency in prior years that the IPA is restricted;
(i) failure to
comply with the confidentiality requirements of this rule;
(j) failure to
invite the state auditor or his designee to engagement entrance conferences,
progress meetings or exit conferences after receipt of related notification
from the OSA;
(k) failure to
comply with OSA referrals or requests in a timely manner;
(l) suspension or debarment by the U.S.
general services administration;
(m) false statements in the IPA’s firm
profile or any other official communication with the OSA;
(n) failure to cooperate timely with
requests from successor IPAs, such as reviewing workpapers; or
(o) any other reason
determined by the state auditor to serve the interest of the state of New
Mexico.
(2) The
OSA shall notify any IPA that it proposes to place under restriction. If the proposed restriction includes a
limitation on the number of engagements that an IPA is eligible to hold, the
IPA shall not submit proposals or bids to new agencies if the number of
multi-year proposals the IPA possesses at the time of restriction is equal to
or exceeds the limitation on the number of engagements for which the IPA is
restricted.
(3) An IPA under
restriction is responsible for informing the agency whether the restricted IPA
is eligible to engage in a proposed contract.
(4) If an agency or
local public body submits an unsigned contract to the OSA for an IPA that was
ineligible to perform that contract due to its restriction, the OSA shall
reject the unsigned contract.
E. Procedures
for imposition of restrictions:
(1) The
state auditor may place an IPA under restriction in accordance with Subsection
D of Section 2.2.2.8 NMAC.
(a) The state
auditor or his designee shall cause written notice of the restriction to be
sent by email and certified mail, return receipt requested, to the IPA, which
shall take effect as of the date of the letter of restriction. The letter shall contain the following
information:
(i) the
nature of the restriction;
(ii) the
conditions of the restriction;
(iii) the
reasons for the restriction;
(iv) the
action to place the IPA on restriction is brought pursuant to Subsection A of
Section 12-6-3 NMSA 1978 and these regulations;
(v) the
IPA may request, in writing, reconsideration of the proposed contract
restriction which shall be received by the OSA within 15 calendar days from the
[day the IPA receives] date of the letter of restriction; and
(vi) the
e-mail or street address where the IPA’s written request for reconsideration
shall be delivered, and the name of the person to whom the request shall be
sent.
(b) The IPA’s
written request for reconsideration shall include sufficient facts to rebut on
a point for point basis each deficiency noted in the OSA’s letter of
restriction. The IPA may request an
opportunity to present in person its written request for reconsideration and
provide supplemental argument as to why the OSA’s determination should be
modified or withdrawn. The IPA may be
represented by an attorney licensed to practice law in the state of New Mexico.
(c) The IPA shall have forfeited its
opportunity to request reconsideration of the restriction(s) if the OSA does
not receive a written request for reconsideration within 15 calendar days of
the date [of receipt] of the letter of restriction. The state auditor may grant, for good cause
shown, an extension of the time an IPA has to submit a request for
reconsideration.
(2) The
OSA shall review an IPA’s request for reconsideration and shall make a
determination on reconsideration within 15 calendar days of the IPA response
letter [receiving the request] unless the IPA has asked to present
its request for reconsideration in person, in which case the OSA shall make a
determination within 15 calendar days from the date of the personal
meeting. The OSA may uphold, modify or
withdraw its restriction pursuant to its review of the IPA’s request for
reconsideration, and shall notify the IPA of its final decision in writing
which shall be sent to the IPA via email and certified mail, return receipt
requested.
F. Procedures to obtain
professional services from an IPA: Concurrent with publication of the list of
approved firms, the OSA shall authorize agencies to select an IPA to perform
their audit or agreed-upon procedures engagement. Agencies are prohibited from
beginning the process of procuring IPA services until they receive the OSA
authorization. Agencies that wish to
begin the IPA procurement process prior to receiving OSA authorization may
request an exception, however any such exceptions granted by OSA are subject to
changes in the final audit rule applicable to the audit and changes in
restrictions to, or disqualifications of, IPAs.
The notification shall inform the agency that it shall consult its
prospective IPA to determine whether the prospective IPA has been restricted by
the OSA as to the type of engagement or number of contracts it is eligible to
perform. Agencies that may be eligible
for the tiered system shall complete the evaluation described in Subsection B
of Section 2.2.2.16 NMAC. Agencies that
receive and expend federal awards shall follow the uniform guidance procurement
requirements from 2 CFR 200.317 to 200.326 and 200.509, and shall also
incorporate applicable guidance from the following requirements. Agencies shall comply with the following
procedures to obtain professional services from an IPA for an audit or
agreed-upon procedures engagement.
(1) Upon
receipt of written authorization from the OSA to proceed, and at no time before
then unless OSA has granted an exception, the agency shall identify all
elements or services to be solicited pursuant to this rule and conduct a
procurement that includes each applicable element of the annual financial audit,
special audit, attestation engagements, performance audit, forensic audits
or agreed upon procedures engagement.
(2) Quotations
or proposals for annual financial audits shall contain each of the following
elements:
(a) financial
statement audit;
(b) federal
single audit (if applicable);
(c) financial
statement preparation so long as the IPA has considered any threat to
independence and mitigated it;
(d) other
non-audit services (if applicable and allowed by current government auditing
standards); and
(e) other
(i.e., audits of component units such as housing authorities, charter schools,
foundations and other types of component units).
(3) The
agency is encouraged to request multiple year proposals for audit and AUP
services (not to exceed three years), however the term of the contract shall be
for one year only. The parties shall
enter a new audit contract each year.
The agency is responsible for procuring IPA services in accordance with
all applicable laws and regulations which may include, but are not limited to,
the State Procurement Code (Chapter 13, Article 1 NMSA 1978) or equivalent home
rule procurement provisions; GSD Rule, Section 1.4.1 NMAC, Procurement Code
Regulations, if applicable; DFA Rule, Section 2.40.2 NMAC, Governing the
Approval of Contracts for the Purchase of Professional Services; Uniform
Guidance; and Section 13-1-191.1 NMSA 1978 relating to campaign contribution
disclosure forms. In the event that
either of the parties to the contract elects not to contract for all of the
years contemplated by a multiple year proposal, or the state auditor
disapproves the contract, the agency shall use the procedures described above
to procure services from a different IPA.
(4) If
the agency is a component of a primary government, the agency’s procurement for
audit services shall include the AU-C 600 (group audits) requirements for the
IPA to communicate and cooperate with the group engagement partner and team,
and the primary government. This
requirement applies to agencies and universities that are part of the statewide
CAFR, other component units of the statewide CAFR and other component units of
any primary government that use a different audit firm from the primary
government’s audit firm. Costs for the
IPA to cooperate with the group engagement partner and team, and the primary
government, caused by the requirements of AU-C 600 (group audit) may not be
charged in addition to the cost of the engagement, as the OSA views this in the
same manner as compliance with any other applicable standard.
(5) Agencies
are encouraged to include representatives of the offices of separately elected
officials such as county treasurers, and component units such as charter
schools and housing authorities, in the IPA selection process. As part of their evaluation process, the OSA
recommends that agencies consider the following when selecting an IPA:
(a) responsiveness
to the request for proposal (the firm’s integrity, record of past performance,
financial and technical resources);
(b) relevant
experience, availability of staff with professional qualifications and
technical abilities;
(c) results
of the firm’s peer and external quality control reviews; and
(d) weighting
the price criteria less than fifteen percent of the total criteria taken into
consideration by the evaluation process or selection committee.
Upon the OSA’s
request, the agency shall make accessible to the OSA all of the IPA procurement
and selection documentation.
(6) After selecting an IPA,
each agency shall enter the appropriate requested information online on the
OSA-connect website (www.osa-app.org). In order to do this, the agency shall
register on OSA-Connect and obtain a user-specified password. The agency’s user shall then use OSA-Connect
to enter information necessary for the contract and for the OSA’s evaluation of
the IPA selection. After the agency
enters the information, the OSA-Connect system generates a draft contract
containing the information entered. The
agency shall submit to the OSA for approval a copy of the unsigned draft contract
by following the instructions on OSA-Connect.
Note that the IPA recommendation form no longer exists as a separate
document, because OSA-Connect
gathers and delivers to the OSA the information historically submitted on the
IPA recommendation form.
(7) The
OSA shall notify the agency as to the OSA’s approval or rejection of the
selected IPA and contract. The OSA’s
review of audit contracts does not include evaluation of compliance with any
state or local procurement laws or regulations; each agency is responsible for
its own compliance with applicable procurement laws, regulations or
policies. After the agency receives
notification of approval of the selected IPA and contract from the OSA, the
agency is responsible for getting the contract signed and sent to any oversight
agencies, including DFA, for approval (if applicable). The OSA shall not physically sign the
contract. After the agency obtains all
the required signature and approvals of the contract, the agency shall submit
an electronic portable document format (PDF)
copy of the final signed contract to the OSA by electronic mail to: reports@osa.state.nm.us.
(8) The
agency shall deliver the unsigned contract generated by OSA-Connect to the OSA by the due date shown below. In the event that the due date falls on a
weekend or holiday, the due date shall be the next business day. If the unsigned contract is not submitted to
the state auditor by these due dates, the IPA may, according to professional
judgment, include a finding of non-compliance with Subsection F of Section
2.2.2.8 NMAC in the audit report or agreed-upon procedures report.
(a) Regional
education cooperatives, cooperative educational services, independent housing
authorities, hospitals and special hospital districts: April 15;
(b) school
districts, counties, and higher education: May 1;
(c) incorporated
counties (of which Los Alamos is the only one), local workforce investment
boards and local public bodies that do not qualify for the tiered system: May
15;
(d) councils
of governments, district courts, district attorneys, state agencies and the
state of New Mexico CAFR: June 1;
(e) local
public bodies that qualify for the tiered system pursuant to Subsections A and
B of Section 2.2.2.16 NMAC [July 1;] with a June 30 fiscal year end:
July 30;
(f) local
public bodies that qualify for the tiered system pursuant to Subsections A and
B of 2.2.2.16 NMAC with a fiscal year end other than June 30 shall use a due
date 30 days after the end of the fiscal year;
[(f)] (g) agencies with a
fiscal year end other than June 30 shall use a due date 30 days before the end
of the fiscal year; and
[(g)] (h) component units
that are being separately audited: on the primary government’s due date.
[(h)] (i) Charter schools
that are chartered by the PED and agencies that are subject to oversight by the
HED have the additional requirement of submitting their audit contract to PED
or HED for approval (Section 12-6-14 NMSA 1978).
[(i)] (j) In the event
the agency’s unsigned contract is submitted to the OSA, but is not approved by
the state auditor, the state auditor shall promptly communicate the decision,
including the reason(s) for disapproval, to the agency, at which time the
agency shall promptly submit a contract with a different IPA using
OSA-Connect. This process shall continue
until the state auditor approves an unsigned contract. During this process, whenever an unsigned
contract is not approved by the state auditor, the agency may submit a written
request to the state auditor for reconsideration of the disapproval. The agency shall submit its request no later
than 15 calendar days after the date of the disapproval and shall include
documentation in support of its IPA selection.
If warranted, after review of the request, the state auditor may hold an
informal meeting to discuss the request.
The state auditor shall set the meeting in a timely manner with
consideration given to the agency’s circumstances.
(9) The agency shall retain all
procurement documentation, including completed evaluation forms, for five years
and in accordance with applicable public records laws.
(10) If
the agency fails to submit an unsigned contract by the due date set forth in
this rule, or, if no due date is applicable, within 60 days of notification
from the state auditor to engage an IPA, the state auditor may conduct the
audit or select the IPA for that agency.
The reasonable costs of such an audit shall be borne by the agency
audited unless otherwise exempted pursuant to Section 12-6-4 NMSA 1978.
(11) In
selecting an IPA for an agency pursuant to Subsection F of Section 2.2.2.8 NMAC
the state auditor shall at a minimum consider the following factors, but may
consider other factors in the state auditor’s discretion that serve the best
interest of the state of New Mexico and the agency:
(a) the
IPA shall be drawn from the list of approved IPAs maintained by the state
auditor;
(b) an
IPA subject to restriction pursuant to Subsection D of Section 2.2.2.8 NMAC, is
ineligible to be selected under this paragraph;
(c) whether
the IPA has conducted one or more audits of similar government agencies;
(d) the
physical proximity of the IPA to the government agency to be audited;
(e) whether
the resources and expertise of the IPA are consistent with the audit
requirements of the government agency to be audited;
(f) the
IPA’s cost profile, including examination of the IPA’s fee schedule and blended
rates;
(g) the
state auditor shall not select an IPA in which a conflict of interest exists
with the agency or that may be otherwise impaired, or that is not in the best
interest of the state of New Mexico.
(12) The
state auditor shall consider, at a minimum, the following factors when
considering which agencies shall be subject to the state auditor’s selection of
an IPA:
(a) whether
agency is demonstrating progress in its own efforts to select an IPA;
(b) whether
the agency has funds to pay for the audit;
(c) whether the
agency is on the state auditor’s “at risk” list;
(d) whether
the agency is complying with the requirements imposed on it by virtue of being
on the state auditor’s “at risk” list;
(e) whether
the agency has failed to timely submit its e-mailed draft unsigned contract
copy in accordance with the audit rule on one or more occasions;
(f) whether
the agency has failed to timely submit its annual financial audit report in
accordance with the audit rule due dates on one or more occasions.
(13) The
state auditor may appoint a committee of the state auditor’s staff to make
recommendations for the state auditor’s final determination as to which IPAs
shall be selected for each government agency subject to the discretion of the
state auditor.
(14) Upon selection of an IPA to audit a
government agency subject to the discretion of the state auditor, the state
auditor shall notify the agency in writing regarding the selection of an IPA to
conduct its audit. The notification
letter shall include, at a minimum, the following statements:
(a) the
agency was notified by the state auditor to select an IPA to perform its audit
or agreed upon procedures engagement;
(b) 60
days or more have passed since such notification, or the applicable due date in
this rule has passed, and the agency failed to deliver its draft contract in
accordance with this subsection;
(c) pursuant
to Subsection A of Section 12-6-14 NMSA 1978, the state auditor is selecting
the IPA for the agency;
(d) delay
in completion of the agency’s audit is contrary to the best interest of the
state and the agency, and threatens the functioning of government and the
preservation or protection of property;
(e) in
accordance with Section 12-6-4 NMSA 1978, the reasonable costs of such an audit
shall be borne by the agency unless otherwise exempted;
(f) selection
of the IPA is final, and the agency shall immediately take appropriate measures
to procure the services of the selected IPA.
G. State
auditor approval/disapproval of unsigned contract: The state auditor
shall use discretion and may not
approve:
(1) An
unsigned audit contract, special audit contract, attestation engagement
contract, performance audit contract, forensic audit contract or an
unsigned agreed upon procedures professional services contract under Section
2.2.2.16 NMAC that does not serve the best interests of the public or the
agency or local public body because of one or more of the following reasons:
(a) lack
of experience of the IPA;
(b) failure
to meet the auditor rotation requirements as follows:
(i) the
IPA is prohibited from conducting the agency audit or agreed upon procedures
engagement for a period of two years because the IPA already conducted those
services for that agency for a period of six consecutive years;
(ii) if
firm A purchases the stock or assets of firm B, or if firm B merges into firm A
with firm A being the surviving firm, firm A shall not be affected for purposes
of the auditor rotation requirement; the auditor rotation clock shall continue
to run without interruption for firm B’s audit contracts, despite the fact that
such audit contracts may be issued by firm A after the purchase or merger. Because of the impact of firm purchases and mergers
on IPA independence the OSA may evaluate historical mergers when applying this
section;
(c) lack of competence or staff
availability;
(d) circumstances
that may cause untimely delivery of the audit report or agreed upon procedures
report;
(e) unreasonably
high or low cost to the agency or local public body;
(f) terms
in the proposed contract that the state auditor considers to be unfavorable,
unfair, unreasonable, or unnecessary;
(g) lack
of compliance with the procurement code, the audit act, or this rule;
(h) the
agency giving too much consideration to the price of the IPA’s response to the
request for bids or request for proposals in relation to other evaluation
criteria;
(i) newness of the IPA to the state
auditor’s list of approved firm;
(j) noncompliance
with the requirements of Section 12-6-3 NMSA 1978 the audit act by the agency
for previous fiscal years; or
(k) any
other reason determined by the state auditor to be in the best interest of the
state of New Mexico.
(2) Audit contracts, special audit
contract, attestation engagement contract, performance audit contract, forensic
audit contract or agreed-upon procedures contracts of an IPA that has:
(a) breached
a prior-year contract;
(b) failed
to deliver an audit or agreed upon procedures report on time;
(c) failed to comply with state laws or
regulations of the state auditor;
(d) performed
non-audit services (including services related to fraud) for an agency or local
public body it is performing an audit, special audit contract, attestation
engagement contract, performance audit contract, forensic audit contract or
an agreed upon procedures for, without prior approval of the state auditor;
(e) performed
non-audit services under a separate contract for services that may be
disallowed by GAGAS independence standards;
(f) failed to respond, in a timely and
acceptable manner, to an OSA audit, special audit contract, attestation
engagement contract, performance audit contract, forensic audit contract or
agreed upon procedures report review or working paper review;
(g) impaired
independence during an engagement;
(h) failed
to cooperate in providing prior-year working papers to successor IPAs;
(i) not adhered to external quality
control review standards as defined by GAGAS and Section 2.2.2.14 NMAC;
(j) has a history of excessive errors or
omissions in audit or agreed upon procedures reports or working papers;
(k) released
the audit report, special audit contract, attestation engagement contract,
performance audit contract, forensic audit contract or agreed upon
procedures report to the agency, local public body or the public before the
audit release letter or the OSA letter releasing the agreed upon procedures
report was received from the OSA;
(l) failed
to submit a completed signed contingency subcontractor form, if required;
(m) failed
to submit a completed firm profile as required by Subsection A of Section
2.2.2.8 NMAC or failed to include all staff in the firm profile who would be
working on the firm’s engagements;
(n) reached
the limit of contracts to which the state auditor restricted the IPA;
(o) failed to respond to communications
from the OSA or engagement clients within a reasonable amount of time; or
(p) otherwise,
in the opinion of the state auditor, the IPA was unfit to be awarded a
contract.
(3) An
audit, special audit contract, attestation engagement contract, performance
audit contract, forensic audit contract or agreed-upon procedures contract
for an IPA received by the OSA which the state auditor decides to perform
himself with or without the assistance of an IPA, and pursuant to Section
12-6-3 NMSA 1978, even if the agency or local public body was previously
designated for audit or agreed upon procedures to be performed by an IPA.
H. Audit contract requirements: The agency shall use the appropriate audit or
agreed upon procedures engagement contract form provided by the OSA through the
OSA-connect website at www.osa-app.org.
The OSA may provide audit or agreed-upon procedures engagement contract
forms to the agency via facsimile or U.S. mail if specifically requested by the
agency. Only contract forms provided by
the state auditor shall be accepted and shall:
(1) be
completed and submitted in its unsigned form by the due date indicated at
Subsection F of Section 2.2.2.8 NMAC;
(2) for all agencies whose contracts are
approved through the DFA’s contracts review bureau, have the IPA’s combined
reporting system (CRS) number verified by the taxation and revenue department
(TRD) after approval by the state auditor; and
(3) in
the compensation section of the contract, include the dollar amount that
applies to each element of the contracted procedures that shall be performed;
I. Professional liability insurance: The IPA shall maintain professional liability
insurance covering any error or omission committed during the term of the
contract. The IPA shall provide proof of
such insurance to the state auditor with the firm profile. The amount maintained should be commensurate
with the risk assumed. The IPA shall
provide to the state auditor, prior to expiration, updated insurance
information.
J. Breach of contract: A breach of any terms of the contract shall
be grounds for immediate termination of the contract. The injured party may seek damages for such
breach from the offending party. Any IPA
who knowingly makes false statements, assurances, or disclosures may be
disqualified from conducting audits or agreed upon procedures engagements of
New Mexico governmental agencies.
K. Subcontractor requirements:
(1) Audit firms that
have only one individual qualified to supervise a GAGAS audit and issue the
related audit report pursuant to Section 61-28B-17 NMSA 1978, and GAGAS
Paragraph 3.76 shall submit with the firm profile, a completed contingency
subcontractor form that is dated to be effective until the date the next firm
profile shall be submitted. The form
shall indicate which IPA on the state auditor’s current list of approved IPA’s
shall complete the IPA’s audits in the event the one individual with the
qualifications described above becomes incapacitated and unable to complete the
audit. See the related contingency
subcontractor form available at www.osanm.org. The OSA shall not approve audit contracts for
such a firm without the required contingency subcontractor form.
(2) In the event an
IPA chooses to use a subcontractor to assist the IPA in working on a specific
audit, then the IPA shall obtain the prior written approval of the state
auditor to subcontract a portion of the audit work. The IPA may subcontract only with IPAs who
have submitted a completed and approved firm profile to the state auditor as
required in Subsection A of Section 2.2.2.8 NMAC. Subcontractors are subject to an independence
analysis, which may include the IPA rotation requirements of Subsection G of
Section 2.2.2.8 NMAC. “Technical review
contracts” are considered subcontracting and are subject to the requirements of
this section. The audit contract shall
specify subcontractor responsibility, who shall sign the report(s), and how the
subcontractor shall be paid. For
additional information see the subcontract work section of the OSA website.
L. IPA independence: IPAs shall maintain independence with respect
to their client agencies in accordance with the requirements of government auditing standards, December
2011 revision, issued by the US-GAO (GAGAS 3.02-3.59).
(1) An
IPA who performs the agency’s annual financial audit shall not enter into any
special audit or non-audit service contract with the respective agency without
the prior written approval of the state auditor. The exception to this requirement is an
engagement that costs one thousand dollars ($1,000) and less (exclusive of
gross receipts tax) for client assistance with responses to IRS and other
regulators. Requests for approval of
professional service contracts shall be submitted to the OSA with the signed
agreement. The OSA shall review the
requests and respond to the agency and the IPA within 30 calendar days of
receipt. The following documentation
shall be submitted to the OSA for review and approval.
(a) The professional
services contract shall be submitted to the state auditor for review and
approval after it has been signed by the agency and the IPA. The contract shall include the contract fee,
start and completion date, and the specific scope of services to be performed
by the IPA.
(b) For
non-audit services, include the auditor’s documentation of:
(i) whether
management has the ability to effectively oversee the non-audit service
pursuant to GAGAS 3.34;
(ii) the
documented assurance from the entity that management shall assume all
management responsibilities, oversee the services by designating an individual,
preferably within senior management, who possesses suitable skill, knowledge,
or experience; evaluate the adequacy and results of the services performed; and
accept responsibility for the results of the services pursuant to GAGAS 3.37;
(iii) the
auditor’s establishment and documentation (engagement letter) of the auditor’s
understanding with the entity’s management or those charged with governance of
the objectives of the non-audit services, the services to be performed, audited
entity’s acceptance of its responsibilities, the auditor’s responsibilities,
and any limitations of the non-audit service, pursuant to GAGAS 3.39; and
(iv) the
auditor’s consideration of significant threats (if applicable) to independence
that have been eliminated or reduced to an acceptable level through the
application of additional safeguards, and a description of those safeguards.
(c) Upon
completion of the non-audit services, the IPA shall provide the state auditor
with a copy of any report submitted to the agency. Such reports are not subject to OSA review
and release procedures unless Section 2.2.2.15 NMAC requires such review and
release procedures. Additionally, the
OSA has the authority to notify the agency, IPA or contractor that the report
is subject to review and release procedures.
(2) An IPA may not enter into any type of
[fraud-related] financial affairs engagement (this includes waste
and abuse related engagements) with a New Mexico governmental agency without
first obtaining the prior written approval of the state auditor. This requirement applies both when the IPA is
the annual auditor approved by OSA and when the IPA is not the agency’s annual
auditor. See Section 2.2.2.15 NMAC for
the requirements to submit such reports to the OSA for review and release. [If the proposed engagement is not related
to fraud, waste or abuse and is therefore not subject to Section 2.2.2.15 NMAC,
then prior written approval by the state auditor is not required when the IPA
is not the agency’s annual auditor.
However, a copy of the contract that is unrelated to fraud and a copy of
any report resulting from such a contract shall be submitted to the OSA when
requested by the OSA.]
(3) The
state auditor shall not approve any contract for an agency’s annual auditor to
perform non-audit services that are management responsibilities as provided in
GAGAS 3.36. Nor shall the state auditor
approve any contract for an agency’s annual auditor to perform services that
always impair the auditor’s independence pursuant to GAGAS 3.50, 3.53, 3.54,
3.56, 3.57, and 3.58.
M. Progress Payments: The state auditor shall approve progress and
final payments for the annual audit contract as follows:
(1) Subsection
A of Section 12-6-14 NMSA 1978 (contract audits) provides that “payment of
public funds may not be made to an independent auditor unless a contract is
entered into and approved as provided in this section.”
(2) Subsection
B of Section 12-6-14 NMSA 1978 (contract audits) provides that the state
auditor may authorize progress payments on the basis of evidence of the
percentage of audit work completed as of the date of the request for partial
payment.
(3) Progress
payments up to seventy percent do not require state auditor approval provided
that the agency certifies the receipt of services before any payments are made
to the IPA. The agency shall monitor
audit progress and make progress payments only up to the percentage that the
audit is completed. If requested by the
state auditor, the agency or the IPA shall provide a copy of the approved
invoices and progress billing(s).
Progress payments of seventy percent to ninety-five percent
require state auditor approval after being approved by the agency. When component unit audits are part of a
primary government’s audit contract, requests for progress payments on the
component unit audit(s) shall be included within the primary government’s
request for progress payment approval.
In this situation, the OSA shall not process separate progress payment
approvals submitted by the component unit.
(4) The
state auditor may limit progress payments allowed to be made without state
auditor approval for an IPA whose previous audits were submitted after the due
date specified in Subsection A of Section 2.2.2.9 NMAC to only the first fifty
percent of the total fee.
(5) Section
12-6-14 NMSA 1978 (contract audits) provides that final payment under an audit
contract may be made by the agency to the IPA only after the state auditor has
determined, in writing, that the audit has been made in a competent manner in
accordance with contract provisions and this rule. The final progress payment of the contract
amount will not be authorized by the OSA until the IPA has submitted the sign
in sheet from the governing authority meeting or written notification from the chairman
or treasurer stating that the IPA presented the audit report in an open meeting. The state auditor's determination with
respect to final payment shall be stated in the letter [accompanying the
release of the report to the agency].
In no circumstance may the total billed by the IPA under the audit
contract exceed the total contract amount, as amended if applicable. Further, as the compensation section of the
contract shall include the dollar amount that applies to each element of the
contracted procedures that shall be performed, if certain procedures, such as a
single audit, are determined to be unnecessary and are not performed, the IPA
may not bill the agency for these services.
Final payment to the IPA by the agency prior to review and release of
the audit report by the state auditor is considered a violation of Section
12-6-14 NMSA 1978 and this rule and shall be reported as an audit finding in
the audit report of the agency. If this
statute is violated, the IPA may be removed from the state auditor’s list of
approved auditors.
N. Contract amendment requirements:
(1) Contract
amendments to contracts for audit services, agreed upon procedures services, or
non-audit services may be submitted to the OSA regarding executed
contracts. Contracts may not be amended
after they expire. The contract should
be amended prior to the additional work being performed or as soon as
practicable thereafter. Any amendments
to contracts shall be made on the contract amendment form available at
www.saonm.org. The OSA’s review of audit
contracts and amendments does not include evaluation of compliance with the
state procurement code or other applicable requirements. Although the parties may amend the delivery
dates in a contract, audit report regulatory due dates cannot be modified by
amendment. The OSA’s review of audit
contract amendments does not include evaluation of compliance with any state or
local procurement laws or regulations; each agency is responsible for its own
compliance with applicable procurement laws, regulations or policies.
(2) Contract amendments submitted for
state auditor approval shall include a detailed explanation of:
(a) the
work to be performed and the estimated hours and fees required for completion
of each separate professional service contemplated by the amendment; and
(b) how
the work to be performed relates to the scope of work outlined in the original
contract.
(3) Since
annual financial audit contracts are fixed-price contracts, contract amendments
for fee increases shall only be approved for extraordinary circumstances,
reasons determined by the state auditor to be in the best interest of the state
of New Mexico, or a significant change in the scope of an audit. For example, if an audit contract did not
include a federal single audit, a contract amendment shall be approved if a
single audit is required. Other examples
of significant changes in the scope of an audit include: the addition of a new
program, function or individual fund that is material to the government-wide
financial statements; the addition of a component unit; and the addition of
special procedures required by this rule, a regulatory body or a local, state
or federal grantor. Contract amendments
shall not be approved to perform additional procedures to achieve an unmodified
opinion. The state auditor shall also
consider the auditor independence requirements of Subsection L of Section
2.2.2.8 NMAC when reviewing contract amendments for approval. Requests for contract amendments shall be
submitted to the OSA with the signed contract amendment. The OSA shall review the requests and respond
to the agency and the IPA within 30 calendar days of receipt.
(4) If
a proposed contract amendment is rejected for lack of adequate information, the
IPA and agency may submit a corrected version for reconsideration.
O. Termination
of audit contract requirements:
(1) The state auditor may terminate an
audit contract to be performed by an IPA after determining that the audit has
been unduly delayed, or for any other reason, and perform the audit entirely or
partially with IPAs contracted by the OSA (consistent with the October 6, 1993,
stipulated order Vigil v. King, No. SF 92-1487(C). The notice of termination of the contract
shall be in writing.
(2) If the agency or IPA terminate the
audit or agreed upon procedures engagement contract pursuant to the termination
paragraph of the contract, the OSA shall be notified of the termination
immediately. The party sending out the
termination notification letter shall simultaneously send a copy of the
termination notification letter to the OSA with an appropriate cover letter,
addressed to the state auditor.
(a) The
agency is responsible for procuring the services of a new IPA in accordance
with all applicable laws and regulations, and this rule.
(b) The unsigned contract for the newly
procured IPA shall be submitted to the OSA within 30 calendar days of the date
of the termination notification letter.
(c) As
indicated in Subsection A of Section 2.2.2.9 NMAC, the state auditor shall not
grant extensions of time to the established regulatory due dates.
(d) If
the IPA does not expect to deliver the engagement report by the regulatory due
date, the IPA shall submit a written notification letter to the state auditor
and oversight agency as required by Subsection A of Section 2.2.2.9 NMAC or
Subsection G of Section 2.2.2.16 NMAC.
[2.2.2.8 NMAC - Rp, 2.2.2.8 NMAC; A, xx/xx/2018]
2.2.2.9 REPORT
DUE DATES:
A. Report
due dates: The IPA shall deliver the organized and bound
annual financial audit report to the state auditor by 5:00 p.m. on the date
specified in the audit contract or send it postmarked by the due date. IPAs and
agencies are encouraged to perform interim work as necessary and appropriate to
meet the following due dates.
(1) The
audit report due dates are as follows:
(a) regional
education cooperatives, cooperative educational services and independent
housing authorities: September 30;
(b) hospitals
and special hospital districts: October
15;
(c) higher
education, state agencies not specifically named elsewhere in this Subsection ,
district courts, district attorneys, the New Mexico finance authority, the New
Mexico lottery authority, and other agencies with June 30 fiscal year-ends that
are reported as component units in the state of New Mexico comprehensive annual
financial report: November 1;
(d) school
districts and the state of New
Mexico component appropriation funds (state general fund): November 15;
(e) the
PED, the state investment council, and the three post-employment benefit
agencies (PERA, ERB and the retiree health care authority): the Wednesday before Thanksgiving day;
(f) counties, incorporated counties (of
which Los Alamos is the only one), workforce investment boards, councils of
governments, and the New Mexico mortgage finance authority: December 1;
(g) local public
bodies including municipalities:
December 15;
(h) the state of New
Mexico comprehensive annual financial report (CAFR): December 31;
(i) the
ERB, PERA and retiree health care authority schedules of employer allocations
reports and related employer guides required by SubSections Z and DD of Section
2.2.2.10 NMAC: June 15;
(j) agencies
with a fiscal year-end other than June 30 shall submit the audit report no
later than five months after the fiscal
year-end;
(k) regarding
component unit reports (e.g., housing authorities, charter schools, hospitals,
foundations, etc.), all separate audit reports prepared by an auditor that is
different from the primary government’s auditor, are due fifteen days before the primary government’s audit report is due,
unless some other applicable due date requires the report to be submitted
earlier;
(l) any
agency that requires its report to be released by December 31st for
any reason (bonding, GFOA, etc.): the earlier of its agency due date or
December 1; and
(m) late
audit or agreed upon procedures reports of any agency (not performed in the
current reporting period): not more than six months after the date the contract
was executed.
(2) If an audit report is not delivered
on time to the state auditor, the auditor shall include this instance of
non-compliance with Subsection A of Section 2.2.2.9 NMAC as an audit finding in
the audit report. This requirement is
not negotiable. If appropriate, the
finding may also be reported as a significant deficiency or material weakness
in the operation the agency’s internal controls over financial reporting
pursuant to AU-C 265.
(3) An
organized bound hard copy of the report shall be submitted for review by the
OSA with the following: copy of the
signed management representation letter and a copy of the completed state
auditor report review guide (available at www.saonm.org). A report shall not be considered submitted to
the OSA for the purpose of meeting the due date until a copy of the signed
management representation letter and the completed report review guide are also
submitted to the OSA. All separate
reports prepared for component units shall also be submitted to the OSA for
review, along with a copy of the management representation letter, and a
completed report review guide for each separate audit report. A separate component unit report shall not be
considered submitted to the OSA for the purpose of meeting the due date until a
copy of the signed management representation letter and the completed report
review guide are also submitted to the OSA.
If a due date falls on a weekend or holiday, or if the OSA is closed due
to inclement weather, the audit report is due the following business day by
5:00 p.m. If the report is mailed to the
state auditor, it shall be postmarked no later than the due date to be
considered filed by the due date. If the
due date falls on a weekend or holiday the audit report shall be postmarked by
the following business day.
(4) AU-C 700.41 requires the auditor’s
report to be dated after audit evidence supporting the opinion has been
obtained and reviewed, the financial statements have been prepared and the
management representation letter has been signed. AU-C 580.20 requires the management
representation letter to be dated the same date as the independent auditor’s
report.
(5) As
soon as the auditor becomes aware that circumstances exist that will make an
agency’s audit report be submitted after the applicable due date provided in
Subsection A of Section 2.2.2.9 NMAC, the auditor shall notify the state
auditor in writing. This notification
shall consist of a letter, not an email.
However, a scanned version of the official letter sent via email is
acceptable. A copy of the letter shall
be sent to the legislative finance committee and any applicable oversight
agency: PED, FCD, LGD, or HED. There
shall be a separate notification for each late audit report. The notification shall include a specific
explanation regarding why the report will be late, when the IPA expects to
submit the report and a concurring signature by a duly authorized
representative of the agency. If the IPA
is going to miss the expected report submission date, then the IPA shall send a
revised notification letter. In the
event the contract was signed after the report due date, the notification
letter shall still be submitted to the OSA explaining the reason the audit
report will be submitted after the report due date. The late report notification letter is not
required if the report was submitted to the OSA for review by the due date, and
then rejected by the OSA, making the report late when resubmitted. Reports resubmitted to the OSA with changes
of the IPA’s opinion after the report due date shall be considered late and a
late audit finding shall be included in the audit report.
B. Delivery
and release of the audit report:
(1) All
audit reports (and all separate reports of component units, if applicable)
shall be organized, bound and paginated.
The OSA does not accept facsimile or e-mailed versions of the audit
reports for initial review. The IPA
shall deliver to the state auditor a hard copy of the audit report for review
by 5:00 p.m. on the day the report is due.
Reports postmarked by the due date shall be considered received by the
due date. Unfinished or excessively
deficient reports shall not satisfy this requirement; such reports shall be
rejected and returned to the IPA and the OSA may take action in accordance with
Subsection C of Section 2.2.2.13 NMAC.
When the OSA rejects and returns a substandard audit report to the IPA,
the OSA shall consider the audit report late if the corrected report is not
resubmitted by the due date. The IPA
shall also report a finding for the late audit report in the audit report. The firm shall submit an electronic version
of the corrected rejected report for OSA review. The name of the electronic file shall be
“corrected rejected report” followed by the agency name and fiscal year.
(2) Before
initial submission, the IPA shall review the report using the appropriate
report review guide available on the OSA’s website. The report review guide shall reference
applicable page numbers in the audit report.
The audit manager or person responsible for the IPA’s quality control
system shall either complete the report review guide or sign off as having
reviewed it. All questions in the guide
shall be answered, and the reviewer shall sign and date the last page of the
guide. If the review guide is not
accurately completed or incomplete, the report shall not be accepted.
(3) IPAs
are encouraged to deliver completed audit reports before the due date. The OSA shall review all audit reports
submitted by the report due date before reviewing reports that are submitted
after the report due date. Once the
review of the report is completed pursuant to Subsection A of Section 2.2.2.13
NMAC, and any OSA comments have been addressed by the IPA, the OSA shall
indicate to the IPA that the report is ready to print. After the OSA issues the “ok to print” communication for the audit
report, the OSA shall authorize the IPA to submit the corrected report with the
following items to the OSA within five business days; an electronic searchable
version of the audit report labeled “final”, in PDF format, an electronic excel
version of the summary of findings report, [an electronic excel version of
the vendor schedule, an electronic excel version of the completed fund balance
form, an electronic excel version of the GASBS 77 disclosure template,] if
applicable, an electronic excel version of the indigent care schedules for
hospitals, if applicable, and an electronic excel version of the schedule of
asset management costs for investing agencies, if applicable (all available at
www.saonm.org). The OSA shall not
release the report until the searchable electronic PDF version of the report
and all required electronic excel schedules are received by the OSA. The electronic file containing the final
audit report shall:
(a) be created and saved as a PDF
document in a single PDF file format (simply naming the file using a PDF
extension .pdf does not by itself create a PDF file);
(b) be
version 5.0 or newer;
(c) not
exceed 10 megabyte (MB) per file submitted (contact the OSA to request an
exception if necessary);
(d) have
all security settings like self-sign security, user passwords, or permissions
removed or deactivated so the OSA is not prevented from opening, viewing, or
printing the file;
(e) not
contain any embedded scripts or executables, including sound or movie
(multimedia) objects;
(f) have a file name
that ends with .pdf;
(g) be free of
worms, viruses or other malicious content (a file with such content shall be
deleted by the OSA);
(h) be “flattened” into a single layer
file prior to submission;
(i) not
contain any active hypertext links, or any internal/external links (although it
is permissible for the file to textually reference a URL as a disabled link);
(j) be saved at 300 dots per inch (DPI)
(lower DPI makes the file hard to read and higher DPI makes the file too
large);
(k) have a name that starts with “final
version,” followed by the name of the agency and the fiscal year; and
(l) be
searchable.
(4) The
IPA shall deliver to the agency the number of copies of the audit report
indicated in the audit contract only after the state auditor has officially
released the audit report with a “release letter”. Release of the audit report to the agency or
the public prior to it being officially released by the state auditor shall
result in an audit finding. The agency
or the IPA shall ensure that every member of the agency’s governing authority
receives a copy of the audit report.
(5) After the release of a report, the
OSA shall provide DFA and the legislative finance committee with notification
that the report is available on the OSA website.
(6) If
an audit report is reissued pursuant to AU-C 560, subsequent events and
subsequently discovered facts, or AAG GAS 13.29-.30 for uniform guidance
compliance reports, the reissued audit report shall be submitted to the OSA
with a cover letter addressed to the state auditor. The cover letter shall explain that:
(a) the
attached report is a “reissued” report;
(b) the
circumstances that caused the reissuance; and
(c) a
summary of the changes that appear in the reissued report. The OSA shall subject the reissued report to
the report review process and upon completion of that report review process,
shall issue a “release letter.” The
contents of the reissued audit report are subject to the confidentiality
requirements described in Subsection M of Section 2.2.2.10 NMAC. Agency management and the IPA are responsible
for ensuring that the latest version of the report is provided to each
recipient of the prior version of the report.
The OSA shall notify the appropriate oversight agencies regarding the
updated report on the OSA website.
(7) If
changes to a released audit report are submitted to the OSA, and the changes do
not rise to the level of requiring a reissued report, the IPA shall submit a
cover letter addressed to the agency, with a copy to the state auditor, which
includes the following minimum elements:
(a) a
statement that the changes did not rise to the level of requiring a reissued
report;
(b) a
description of the circumstances that caused the resubmitted updated report;
and
(c) a
summary of the changes that appear in the resubmitted updated report compared
to the prior released report. Agency
management and the IPA are responsible for ensuring that the latest version of
the resubmitted report is provided to each recipient of the prior version of
the report. The OSA shall notify the
appropriate oversight agencies regarding the updated report on the OSA website.
C. Required
status reports: For an agency that has failed to submit audit
or agreed-upon procedures reports as required by this rule, and has therefore
been designated as “at risk” due to late reports, the state auditor requires
the agency to submit written status reports to the OSA on each March 15, June
15, September 15, and December 15 that the agency is not in compliance with
this rule. Status reports are not
required for agencies that are included on the “at risk” list solely due to an
adverse or disclaimed independent auditor’s opinion. The status report shall be signed by a member
of the agency’s governing authority, a designee of the governing authority or a
member of the agency’s top management.
If the agency has a contract with an IPA to conduct the audit or perform
the agreed upon procedures engagement, the agency must send the IPA a copy of
the quarterly status report. IPAs engaged to audit or perform agreed upon
procedures engagements for agencies with late reports are responsible for
assisting these agencies in complying with the reporting requirements of this
section. Failure to do so shall be noted
by the OSA and taken in to account during the IPA Firm Profile evaluation
process. At a minimum, the quarterly
written status report shall include:
(1) a
detailed explanation of the agency’s efforts to complete and submit its audit
or agreed-upon procedures;
(2) the
current status of any ongoing audit or agreed-upon procedures work;
(3) any
obstacles encountered by the agency in completing its audit or agreed-upon
procedures; and
(4) a projected completion date for the
financial audit or agreed-upon procedures report.
[2.2.2.9 NMAC - Rp, 2 2.2.9 NMAC; A, xx/xx/2018]
2.2.2.10 GENERAL CRITERIA:
A. Scope of annual financial audit:
(1) The
financial audit shall cover the entire financial reporting entity including the
primary government and the component units of the primary government, if any.
(a) The
primary government shall determine whether an agency that is a separate legal
entity from the primary government is a component unit of the primary
government as defined by GASBS 14, 39, 61, and 80 (as amended). The flowchart at GASBS 61.68 may be useful in
making this determination. The primary
government shall notify all other agencies determined to be component units by
September 15 of the subsequent fiscal year.
Failure to meet this due date results in a compliance finding. All agencies that meet the criteria to be a
component unit of the primary government shall be included with the audited
financial statements of the primary government by discrete presentation unless
otherwise approved by the state auditor.
An exemption shall be requested by the primary government, in writing,
from the state auditor in order to present a component unit as other than a
discrete component unit. The request for
an exemption shall include a detailed explanation, conclusion and supporting
documentation justifying the request for blended component unit
presentation. Documentation of the state
auditor’s approval of the blended component unit presentation shall accompany
the bound hard copy of the report submitted to OSA for review. Component units are reported using the
government financial reporting format if they have one or more of the
characteristics described at AAG SLV 1.01.
If a component unit does not qualify to be reported using the
governmental format, that fact shall be explained in the notes to the financial
statements (summary of significant accounting policies: financial reporting
entity). If there was a change from
the prior year’s method of presenting a component unit or change in component
units reported, the notes to the financial statements shall disclose the
reason(s) for the change.
(b) If
a primary government has no component units, that fact shall be disclosed in
the notes to the financial statements (summary of significant accounting
policies: financial reporting entity).
If the primary government has component units that are not included in
the financial statements due to materiality, that fact shall also be disclosed
in the notes. However, if the primary
government is a state agency, department, board, public institution of higher
education, public post-secondary educational institution, county, municipality
or public school district, Section 6-5A-1 NMSA 1978 requires all 501(c)3
component unit organizations with a gross annual income in excess of two
hundred fifty thousand dollars (250,000) to be audited annually. This statutory requirement does not set a
universal materiality threshold for purposes of the performing audits subject
to this rule.
(c) The
state auditor requires component unit(s) to be audited by the same audit firm
that audits the primary government (except for public housing authority
component units that are statutorily exempt from this requirement, and the
statewide CAFR). Requests for exemption
from this requirement shall be submitted in writing by the primary government
to the state auditor. If the request to
use a different auditor for the component unit is approved in writing by the
state auditor, the following requirements shall be met:
(i) the
IPAs of the primary government and all component units shall consider and
comply with the requirements of AU-C 600;
(ii) the group engagement partner shall
agree that the group engagement team will be able to obtain sufficient
appropriate audit evidence through the use of the group engagement team’s work
or use of the work of the component auditors (AU-C 600.15);
(iii) the
component unit auditor selected shall appear on the OSA list of approved IPAs;
(iv) all
bid and auditor selection processes shall comply with the requirements of this
rule;
(v) the OSA standard
contract form shall be used by both the primary government and the component
unit;
(vi) the primary
government, the primary engagement partner, management of the component unit,
and the component unit auditor shall all coordinate their efforts to ensure
that the audit reports of the component unit and the primary government are
submitted by the applicable due dates;
(vii) all component unit
findings shall be disclosed in the primary government’s audit report (except
the statewide CAFR which shall include only component unit findings that are
significant to the state as a whole); and
(viii) any separately issued
component unit financial statements and associated auditors’ reports shall be
submitted to the state auditor by the due date in Subsection A of Section
2.2.2.9 NMAC for the review process described in Subsection A of Section
2.2.2.13 NMAC.
(d) With
the exception of the statewide CAFR, the following SI pertaining to component
units for which separately issued financial statements are not available shall
be audited and opined on as illustrated in AAG SLV 16.103 example A-15: financial statements for each of the
component unit’s major funds, combining and individual fund financial statements
for all of the component unit’s non-major funds, and budgetary comparison
statements for the component unit’s general fund and major special revenue
funds that have legally adopted annual budgets (AAG SLV 3.22).
(2) Audits
of agencies shall be comprised of a financial and compliance audit of the
financial statements and schedules as follows:
(a) The
level of planning materiality described at AAG SLV 4.72-4.73 and exhibit 4.1
shall be used. Planning materiality for
component units is at the individual component unit level.
(b) The
scope of the audit includes the following statements and disclosures which the
auditor shall audit and give an opinion on.
The basic financial statements (as defined by GASB and displayed in AAG
SLV exhibit 4.1) consisting of:
(i) the
governmental activities, the business-type activities, and the aggregate
discretely presented component units;
(ii) each
major fund and the aggregate remaining fund
information;
(iii) budgetary
comparison statements for the general fund and major special revenue funds that
have legally adopted annual budgets (when budget information is available on
the same fund structure basis as the GAAP fund structure, the state auditor
requires that the budgetary comparison statements be included as part of the
basic financial statements consistent with GASBS 34 fn. 53, as amended, and AAG
SLV 11.13); and
(iv) the
related notes to the financial
statements.
(c) Budgetary
comparison statements for the general fund and major special revenue funds
presented on a fund, organization, or program structure basis because the
budgetary information is not available on the GAAP fund structure basis for
those funds shall be presented as RSI pursuant to GASBS 41.
(d) The
auditor shall apply procedures and report in the auditor’s report on the
following RSI (if applicable) pursuant to AU-C 730:
(i) management’s
discussion and analysis (GASBS 34.8-.11);
(ii) RSI
data required by GASBS 67 and 68 for defined benefit pension plans;
(iii) RSI
schedules required by GASBS 43 and 74 for postemployment benefit plans other
than pension plans;
(iv) RSI
schedules required by GASBS 45 and 75 regarding employer accounting and
financial reporting for postemployment benefits other than pensions; and
(v) infrastructure
modified approach schedules derived from asset management systems (GASBS
34.132-133).
(e) The
audit engagement and audit contract compensation include an AU-C 725 opinion on
the SI schedules presented in the audit report.
The auditor shall subject the information on the SI schedules to the
procedures required by AU-C 725. The
auditor shall report on the remaining SI in an other-matter paragraph following
the opinion paragraph in the auditor’s report on the financial statements
pursuant to AU-C 725. With the exception of the statewide CAFR, the following
SI schedules are required to be included in the AU-C 725 opinion if the
schedules are applicable to the agency:
(i) primary government combining and
individual fund financial statements for all non-major funds (GASBS 34.383);
(ii) the
schedule of expenditures of federal awards required by uniform guidance;
(iii) the schedule of pledged collateral
required by Subsection P of Section 2.2.2.10 NMAC;
(iv) the schedule of changes in assets and
liabilities for agency funds required by Subsection X of Section 2.2.2.10 NMAC;
(v) the financial data schedule (FDS) of
housing authorities pursuant to Subsection B of 2.2.2.12 NMAC;
(vi) the school district schedule of cash
reconciliation required by Subsection C of 2.2.2.12 NMAC. In addition, the school district schedule of
cash reconciliation SI shall be subjected to audit procedures that ensure the
cash per the schedule reconciles to the PED reports as required by Subsection C
of 2.2.2.12 NMAC;
(vii) the indigent care schedules for
hospitals pursuant to Subsection F of 2.2.2.12 NMAC; and
(viii) any other SI schedule required by this
rule.
[ (f) The
agency shall prepare a schedule of vendors using the form and instructions
available on www.saonm.org, for procurements
exceeding sixty thousand dollars ($60,000) (excluding gross receipts tax) that
occurred during the audited fiscal year, that includes the following
information: request for bid or request for proposal number; type of
procurement, for example, request for proposal (RFP), sole source, etc.; the
names and physical addresses of all vendors that responded to requests for bids
or requests for proposals during the fiscal year; whether each vendor received
the award; dollar amount of the awarded contract; dollar amount of any contract
amendment during the fiscal year that caused a previously awarded contract to
exceed sixty thousand dollars ($60,000) (excluding gross receipts tax); whether
each responding vendor was an in-state vendor or an out-of-state vendor (based
on the statutory definition); if the vendor was in-state and chose the
veterans’ preference instead of the in-state preference (this is n/a for
federal funds); and a short description of the scope of work. The schedule shall include all contracts
totaling over sixty thousand dollars ($60,000) (excluding gross receipts tax)
regardless of whether related expenditures exceeded sixty thousand dollars
($60,000) during the fiscal year and regardless of procurement method. Exclude information on a multi-year
procurement that occurred in a prior year unless there was a contract amendment
during the current fiscal year that caused the previously existing contract to
exceed sixty thousand dollars ($60,000) for the first time. Exclude procurements that agencies performed
based on statewide pricing agreements obtained by general services department
(GSD) or cooperative educational services from the schedule. However, agencies like GSD and cooperative
educational services that perform procurement services for other agencies that
result in price agreements shall disclose all their procurements in their vendor
schedules in their own audit reports, including procurements that resulted in
price agreements. The IPA shall submit
an electronic excel version of the vendor schedule using the form provided by
the OSA with the final PDF version of the audit report as required by
Subsection B of Section 2.2.2.9 NMAC. The GAO may aggregate, analyze and
publish vendor schedule information.]
B. Governmental
auditing, accounting and financial reporting standards: The audits shall be conducted in accordance
with:
(1) the most recent
revision of GAGAS issued by the United States government accountability office;
(2) U.S. auditing
standards-AICPA (clarified);
(3) uniform
administrative requirements, cost principles, and audit requirements for
federal awards (uniform guidance);
(4) AICPA audit and accounting
guide, government auditing standards and single audits, (AAG GAS) latest
edition;
(5) AICPA audit and
accounting guide, state and local governments (AAG SLV) latest edition; and
(6) 2.2.2 NMAC,
requirements for contracting and conducting audits of agencies, latest edition.
C. Financial
statements and notes to the financial statements: The financial
statements and notes to the financial statements shall be prepared in
accordance with accounting principles generally accepted in the United States
of America. Governmental accounting
principles are identified in the government accounting standards board (GASB)
codification, latest edition. IPAs shall
follow interpretations, technical bulletins, and concept statements issued by
GASB, other applicable pronouncements, and GASB illustrations and trends for
financial statements. In addition to the
revenue classifications required by NCGAS 1.110, the OSA requires that the
statement of revenues, expenditures, and changes in fund balance - governmental
funds include classifications for intergovernmental revenue from federal
sources and intergovernmental revenue from state sources, as applicable.
D. Requirements for preparation of
financial statements:
(1) The
financial statements presented in audit reports shall be prepared from the
agency's books of record and contain amounts rounded to the nearest dollar.
(2) The
financial statements are the responsibility of the agency. The agency shall maintain adequate accounting
records, prepare financial statements in accordance with accounting principles
generally accepted in the United States of America, and provide complete,
accurate, and timely information to the IPA as requested to meet the audit
report due date imposed in Subsection A of Section 2.2.2.9 NMAC.
(3) If
there are differences between the financial statements and the books, the IPA
shall provide to the agency the adjusting journal entries and the supporting
documentation that reconciles the financial statements in the audit report to
the books.
(4) If
the IPA prepared the financial statements for management’s review and approval,
including documenting independence safeguards as required by GAGAS 3.59, the
fact that the auditor prepared the financial statements shall be disclosed on
the exit conference page of the audit report.
If the IPA prepared the financial statements, the auditor shall
determine whether an audit finding shall be reported in accordance with AU-C
265.
E. Audit
documentation requirements:
(1) The
IPA’s audit documentation shall be retained for a minimum of five years from
the date shown on the opinion letter of the audit report or longer if requested
by the federal oversight agency, cognizant agency, or the state auditor. The state auditor shall have access to the audit
documentation at the discretion of the state auditor.
(2) When
requested by the state auditor, all of the audit documentation shall be
delivered to the state auditor by the due date indicated in the request.
(3) The
audit documentation of a predecessor IPA shall be made available to a successor
IPA in accordance with AU-C 510.07 and 510.A3 to 510.A11, and the predecessor
auditor’s contract. Any photocopy costs
incurred shall be borne by the requestor.
If the successor IPA finds that the predecessor IPA’s audit
documentation does not comply with applicable auditing standards and this rule[,]
or does not support the financial data presented in the audit report, the
successor IPA shall notify the state auditor in writing specifying all
deficiencies. If the state auditor
determines that the nature of deficiencies indicate that the audit was not
performed in accordance with auditing or accounting standards generally
accepted in the United States of America and related laws, rules and
regulations and this rule, any or all of the following actions may be taken:
(a) the state
auditor may require the predecessor IPA firm to correct its working papers and
reissue the audit report to the agency, federal oversight or cognizant agency
and any others receiving copies;
(b) the
state auditor may deny or limit the issuance of future audit contracts; or
(c) the
state auditor may refer the predecessor IPA to the New Mexico public
accountancy board for possible licensure action.
F. Auditor
communication requirements:
(1) The IPA shall comply with the
requirements for auditor communication with those charged with governance as
set forth in AU-C 260 and GAGAS 4.03 and 4.04.
(2) After
the agency and IPA have an approved audit contract in place, the IPA shall
prepare a written and dated engagement letter during the planning stage of a
financial audit, addressed to the appropriate officials of the agency, keeping
a copy of the signed letter as part of the audit documentation. In addition to meeting the requirements of
the AICPA professional standards and the GAGAS requirements, the engagement
letter shall state that the engagement shall be performed in accordance with
Section 2.2.2 NMAC.
(3) The audit engagement letter shall not
include any fee contingencies. The
engagement letter shall not be interpreted as amending the contract. Nothing in the engagement letter can impact
or change the amount of compensation for the audit services. Only a contract amendment submitted pursuant
to Subsection N of Section 2.2.2.8 NMAC may amend the amount of compensation
for the audit services set forth in the contract.
(4) A separate engagement letter and list
of client prepared documents is required for each fiscal year audited. The IPA shall provide a copy of the engagement
letter and list of client prepared documents immediately upon request from the
state auditor.
(5) The
IPA shall conduct an audit entrance conference with the agency. The OSA has the authority to notify the
agency or IPA that the state auditor shall be informed of the date of the
entrance conference, any progress meetings and the exit conference. If such notification is received, the IPA and
agency shall invite the state auditor or his designee to attend all such
conferences no later than 72 hours before the proposed conference or meeting.
(6) All
communications with management and the agency’s oversight officials during the
audit, regarding any instances of non-compliance or internal control
weaknesses, shall be made in writing.
The auditor shall obtain and report the views of responsible officials
of the audited agency concerning the audit findings, pursuant to GAGAS
4.33. Any violation of law or good
accounting practice, including instances of non-compliance or internal control
weaknesses, shall be reported as audit findings per Section 12-6-5NMSA
1978. Separate management letter
comments shall not be issued as a substitute for such findings.
G. Reverting
or non-reverting funds: Legislation can designate a fund as reverting
or non-reverting. The IPA shall review
the state law that appropriated funds to the agency to confirm whether any
unexpended, unencumbered balance of a specific appropriation shall be reverted
and to whom. The law may also indicate
the due date for the required reversion.
Appropriate audit procedures shall be performed to evaluate compliance
with the law and accuracy of the related liability account balances due to
other funds, governmental agencies, or both.
The financial statements and the accompanying notes shall fully disclose
the reverting or non-reverting status of a fund or appropriation. The financial statements shall disclose the
specific legislation that makes a fund or appropriation non-reverting and any
minimum balance required. If
non-reverting funds are commingled with reverting appropriations, the notes to
the financial statements shall disclose the methods and amounts used to
calculate reversions. For more
information regarding state agency reversions, see Subsection A of Section
2.2.2.12 NMAC and the department of finance and administration (DFA) white
papers “calculating reversions to the state general fund,” and “basis of
accounting-modified accrual and the budgetary basis.” The statewide CAFR is exempt from this
requirement.
H. Referrals and Risk Advisories: The
Audit Act (Section 12-6-1 et seq. NMSA 1978) states that “the financial affairs
of every agency shall be thoroughly examined and audited each year by the state
auditor, personnel of the state auditor’s office designated by the state auditor
or independent auditors approved by the state auditor.” (Section 12-6-3 NMSA
1978). Further, audits of New Mexico
governmental agencies “shall be conducted in accordance with generally accepted
auditing standards and rules issued by the state auditor.” (Section 12-6-3 NMSA
1978).
(1) In an effort to ensure that the
finances of state and local governments are thoroughly examined, OSA may provide IPAs with written
communications to inform the IPA that OSA received information [that
suggests] which may suggest elevated risk in specific areas relevant
to a particular agency’s annual financial and compliance audit. These communications shall be referred to as
“referrals.” Referrals may relate to any
topic relevant to the scope of the annual financial and compliance audit. IPAs
shall take the circumstances described in OSA referral communications into
account in their risk assessment and perform such procedures as, in the IPA’s
professional judgment, are necessary to determine what further action, if any, in
the form of additional disclosure, findings and recommendations are appropriate
in connection with the annual audit of the agency. After the conclusion of fieldwork but at
least 14 days prior to submitting the draft annual audit report to the OSA for
review, IPAs shall provide written confirmation to the OSA that the IPA took
appropriate action in response to the referral.
This written confirmation shall respond to all aspects of the referral
and list any findings associated with the subject matter of the referral. IPAs shall retain adequate documentation in
the audit workpapers to support the written confirmation to OSA that the IPA
took appropriate action in response to the referral. As outlined in Section 2.2.2.13 NMAC the OSA
may review IPA workpapers associated with the annual audit of any agency. OSA workpaper review procedures shall include
examining the IPA documentation associated with referrals. Insufficient or inadequate documentation may
result in deficiencies noted in the workpaper review letter and may negatively
impact the IPA during the subsequent firm profile review process. In accordance with Subsection D of Section
2.2.2.8 NMAC IPAs may be placed on restriction if an IPA refuses to comply with
OSA referrals in a timely manner.
(2) OSA may issue written
communications to inform agencies and IPAs that OSA received information that
suggests elevated risk in specific areas relevant to the annual financial and
compliance audits of some agencies. These
communications shall be referred to as “risk advisories.” Risk advisories shall be posted on the OSA
website in the following location: https://www.saonm.org/risk_advisories. Risk advisories may relate to any topic
relevant to annual financial and compliance audits of New Mexico agencies. IPAs shall take the circumstances described
in OSA risk advisories into account in their risk assessment and perform such
procedures and testwork as, in the IPA’s professional judgment, are necessary
to determine what further action, if any, in the form of disclosure, findings
and recommendations are appropriate in connection with the annual audit of the
agency.
I. State auditor workpaper requirement: The state auditor requires that audit
workpapers include a written audit program for fund balance and net position
that includes tests for proper classification of fund balance pursuant to GASBS
54 and proper classification of net position pursuant to GASBS 34.34-.37 (as
amended) and GASBS 46.4-.5 (as amended).
J. State compliance
audit requirements: An IPA shall identify significant state
statutes, rules and regulations applicable to the agency under audit and
perform tests of compliance. In
designing tests of compliance, IPAs may reference AU-C 250 relating to consideration
of laws and regulations in an audit of financial statements and AU-C 620
relating to using the work of an auditor’s specialist. As discussed in AU-C 250.A23, in situations
where management or those charged with governance of the agency, or the
agency’s in-house or external legal counsel, do not provide sufficient
information to satisfy the IPA that the agency is in compliance with an
applicable requirement, the IPA may consider it appropriate to consult the
IPA’s own legal counsel. AU-C 620.06 and
620.A1 discuss the use of an auditor’s specialist in situations where expertise
in a field other than accounting or auditing is necessary to obtain sufficient,
appropriate audit evidence, such as the interpretation of contracts, laws and
regulations. In addition to the
significant state statutes, rules and regulations identified by the IPA,
compliance with the following shall be tested if applicable (with the exception
of the statewide CAFR audit):
(1) Procurement
Code, Sections 13-1-1 to 13-1-199 NMSA 1978 including providing the state purchasing
agent with the name of the agency’s chief procurement officer, pursuant to
Section 13-1-95.2 NMSA 1978, and Procurement Code Regulations, Section 1.4.1
NMAC, or home rule equivalent.
(2) Per Diem and
Mileage Act, Sections 10-8-1 to 10-8-8 NMSA 1978, and Regulations Governing the
Per Diem and Mileage Act, Section 2.42.2 NMAC.
(3) Public
Money Act, Sections 6-10-1 to 6-10-63 NMSA 1978, including the requirements
that county and municipal treasurers deposit money in their respective
counties, and that the agency receive a joint safe keeping receipt for pledged
collateral.
(4) Public
School Finance Act, Sections 22-8-1 to 22-8-48 NMSA 1978.
(5) Investment
of Public Money Act, Sections 6-8-1 to 6-8-25 NMSA 1978.
(6) Public
Employees Retirement Act, Sections 10-11-1 to 10-11-142 NMSA 1978. IPAs shall
test to ensure one hundred percent of payroll is reported to PERA. PERA membership is mandatory, unless
membership is specifically excluded pursuant to Subsection B of Section 10-11-3
NMSA 1978.
(7) Educational
Retirement Act, Sections 22-11-1 to 22-11-55 NMSA 1978.
(8) Sale
of Public Property Act, Sections 13-6-1 to 13-6-8 NMSA 1978.
(9) Anti-Donation
Clause, Article IX, Section 14, New Mexico Constitution.
(10) Special,
Deficiency, and Supplemental Appropriations (appropriation laws applicable for
the year under audit).
(11) State agency budget
compliance with Sections 6-3-1 to 6-3-25 NMSA 1978, and local government
compliance with Sections 6-6-1 to 6-6-19 NMSA 1978.
(12) Lease
purchase agreements, Article IX, Sections 8 and 11, New Mexico Constitution;
Sections 6-6-11 to 6-6-12 NMSA 1978; Montano v. Gabaldon, 108 NM 94, 766 P.2d
1328, 1989).
(13) Accounting
and control of fixed assets of state government, Sections 2.20.1.1 to 2.20.1.18
NMAC, (updated for GASBS 34 as applicable).
(14) Requirements
for contracting and conducting audits of agencies, Section 2.2.2 NMAC.
(15) Article
IX of the state constitution limits on indebtedness.
(16) Any
law, regulation, directive or policy relating to an agency’s use of gasoline
credit cards, telephone credit cards, procurement cards, and other
agency-issued credit cards.
(17) Retiree Health Care
Act, Sections 10-7C-1 to 10-7C-19 NMSA 1978.
IPAs shall test to ensure one hundred percent of payroll is reported to
NMRHCA. NMRHCA employer and employee
contributions are set forth in Section 10-7C-15 NMSA 1978.
(18) Governmental
Conduct Act, Sections 10-16-1 to 10-16-18 NMSA 1978.
(19) School
Personnel Act, Sections 22-10A-1 to 22-10A-39 NMSA 1978.
(20) School Athletics Equity
Act, Sections 22-31-1 to 22-31-6 NMSA 1978.
IPAs shall test whether the district has submitted the required
school-district-level reports, but no auditing of the reports or the data
therein is required.
K. Federal
requirements: IPAs shall conduct
their audits in accordance with the requirements of the following government
pronouncements and shall test federal compliance audit requirements as
applicable:
(1) government
auditing standards (GAGAS) issued by the United States government
accountability office, most recent revision;
(2) uniform
administrative requirements, cost principles, and audit requirements for
federal awards;
(3) compliance
supplement, latest edition;
(4) catalog
of federal domestic assistance (CFDA), latest edition; and
(5) internal revenue
service (IRS) employee income tax
requirements. IRS Publication 15-B,
employer’s tax guide to fringe benefits, available online, provides detailed
information regarding the taxability of fringe benefits.
L. Audit
finding requirements:
(1) Communicating
findings: IPAs shall communicate findings in accordance with generally accepted
auditing standards and the requirements of GAGAS 4.23. All finding reference numbers shall follow a
standard format with the four digit audit year, a hyphen and a three digit
sequence number (e.g. [2013] 2018-001, [2013] 2018-002
[2013] 2018-999). All
prior year findings shall include all finding numbers used under historical
numbering systems in brackets, following the current year finding reference
number, to enable the report user to see what year the finding originated and
how it was identified in previous years.
Finding reference numbers for single audit findings reported on the data
collection form shall match those reported in the schedule of findings and
questioned costs and the applicable auditor’s report. Depending on the IPA’s classification of the
finding, the finding reference number shall be followed by one of the following
descriptions: “material weakness”; “significant deficiency”; “material
non-compliance”; “other non-compliance”; or “[findings that do not rise to
the level of a significant deficiency] other matters.”
(a) IPAs shall
evaluate deficiencies to determine whether individually or in combination they
are significant deficiencies or material weaknesses in accordance with AU-C
260.
(b) Findings that
meet the requirements described in AAG GAS 4.12 shall be included in the report
on internal control over financial reporting and on compliance and other
matters based on an audit of financial statements performed in accordance with
government auditing standards. AAG GAS
13.35 table 13-2 provides guidance on whether a finding shall be included in
the schedule of findings and questioned costs.
(c) Section
12-6-5NMSA 1978 requires that “each report set out in detail, in a separate
section, any violation of law or good accounting practices found by the audit
or examination.” When auditors detect
violations law or good accounting practices that shall be reported per Section
12-6-5NMSA 1978, but that do not rise to the level of significant deficiencies
or material weaknesses, such findings are considered to warrant the attention
of those charged with governance due to the statutory reporting
requirement. The auditor shall
communicate such violations in the “compliance and other matters” paragraph in
the report on internal control over financial reporting and on compliance and
other matters based on an audit of financial statements performed in accordance
with government auditing standards.
Findings required by Section 12-6-5NMSA 1978 shall be presented in a
separate schedule of findings labeled “Section 12-6-5NMSA 1978 findings”. This schedule shall be placed in the back of
the audit report following the financial statement audit and federal award
findings. Per AAG GAS 13.48 there is no
requirement for such findings to be included or referenced in the uniform
guidance compliance report.
(d) Each audit finding (including current
year and unresolved prior-year findings) shall specifically state and describe
the following:
(i) condition
(provides a description of a situation that exists and includes the extent of
the condition and an accurate perspective, the number of instances found, the
dollar amounts involved, if specific amounts were identified, and for repeat findings, management’s progress
or lack of progress towards implementing the prior year planned corrective
actions);
(ii) criteria
(identifies the required or desired state or what is expected from the program
or operation; cites the specific section of law, regulation, ordinance,
contract, or grant agreement if applicable);
(iii) effect
(the logical link to establish the impact or potential impact of the difference
between the situation that exists (condition) and the required or desired state
(criteria); demonstrates the need for corrective action in response to
identified problems or relevant risks);
(iv) cause
(identifies the reason or explanation for the condition or the factors
responsible for the difference between what the auditors found and what is
required or expected; the cause serves as a basis for the recommendation);
(v) recommendation
addressing each condition and cause; and
(vi) agency
response (the agency’s comments about the finding, including specific planned corrective actions with a timeline and
designation of what employee position(s) are responsible for meeting the
deadlines in the timeline).
(e) Uniform
guidance regarding single audit findings (uniform guidance 200.511): The
auditee is responsible for follow-up and corrective action on all audit
findings. As a part of this
responsibility, the auditee shall prepare a summary schedule of prior audit
findings and a corrective action plan for current year audit findings in
accordance with the requirements of uniform guidance 200.511. The corrective action plan and summary
schedule of prior audit findings shall include findings relating to the
financial statements which shall be reported in accordance with GAGAS. The summary schedule of prior year findings
and the corrective action plan shall be included in the reporting package
submitted to the federal audit clearinghouse (AAG GAS 13.48 fn 38). In addition to being included in the agency
response to each audit finding, the corrective action plan shall be provided on
the audited agency’s letterhead in a document separate from the auditor’s
findings. (COFAR frequently asked questions on the office of management and
budget’s uniform administrative requirements, cost principles, and audit
requirements for federal awards at 2 CFR 200, Section 511-1).
(f) all audit reports shall include a
summary of audit results preceding the presentation of audit findings (if any).
The summary of audit results shall
include the type of auditor report issued and whether the following categories
of findings for internal control over financial reporting were identified:
material weakness, significant deficiency, and material noncompliance.
(2) Prior year
findings:
(a) IPAs
shall comply with the requirements of GAGAS Section 4.05 relating to findings
and recommendations from previous audits and attestation engagements. In addition, IPAs shall report the status of all prior-year findings and all findings from special audits
performed under the oversight of the state auditor in the current year audit
report in a summary schedule of prior year audit findings. GAGAS 4.05 requirements shall also be
applied to findings from special audits performed under the oversight of the
state auditor released by June 30 of the current fiscal year. If a special audit performed under the
oversight of the state auditor is released after June 30 but before the
financial statements are available for issuance, the IPA shall include a
subsequent event note to the financial statements referring readers to the
special audit report. The summary
schedule of prior year audit findings shall include the prior year finding
number, the title, and whether the finding was resolved, repeated, or repeated
and modified in the current year. No
other information shall be included in the summary schedule of prior year audit
findings. All findings from special
audits performed under the oversight of the state auditor shall be included in
the findings of the annual financial and compliance audits of the related
fiscal year.
(b) Uniform
guidance regarding single audit prior year findings (uniform guidance
200.511): The auditor shall follow up on
prior audit findings, perform procedures to assess the reasonableness of the
summary schedule of prior audit findings prepared by the auditee in accordance
with the uniform guidance, and report, as a current-year audit finding, when
the auditor concludes that the summary schedule of prior audit findings
materially misrepresents the status of any prior audit finding (AAG GAS 13.51).
(3) Current-year
audit findings: Written audit findings
shall be prepared and submitted to management of the agency as soon as the IPA
becomes aware of the findings so the agency has time to respond to the findings
prior to the exit conference. The agency
shall prepare “planned corrective actions” as required by GAGAS 4.33. The agency shall respond, in writing, to the
IPA’s audit findings within 10 business days.
Lack of agency responses within the 10 business days does not warrant a
delay of the audit report. The agency’s
responses to the audit findings and the “planned corrective actions” shall be
included in the finding after the recommendation. If the IPA disagrees with the management’s
comments in response to a finding, they may explain in the report their reasons
for disagreement, after the agency’s response (GAGAS 4.38). Pursuant to GAGAS 4.39, “if the audited
agency refuses to provide comments or is unable to provide comments within a
reasonable period of time, the auditors may issue the report without receiving
comments from the audited entity. In
such cases, the auditors should indicate in the report that the audited entity
did not provide comments.”
(4) If
appropriate in the auditor’s professional judgment, failure to submit the
completed audit contract to the OSA by the due date at Subsection F of Section
2.2.2.8 NMAC may be reported as a current year compliance finding.
(5) If
an agency has entered into any professional services contract with the IPA who
performs the agency’s annual financial audit, or the scope of work on any
professional services contract relates to fraud, waste, or abuse, and the
contract was not approved by the state auditor, the IPA shall report a finding
of non-compliance with Subsection L of Section 2.2.2.8 NMAC.
(6) If
an agency subject to the procurement code failed to meet the requirement to
have a certified chief procurement officer during the fiscal year, the IPA
shall report a finding of non-compliance with Section 1.4.1.94 NMAC.
(7) Component
unit audit findings shall be reported in the primary government’s financial
audit report. This is not required for
the statewide CAFR unless a finding of a legally separate component unit is
significant to the state as a whole.
(8) Except
as discussed in Subsections A and E of Section 2.2.2.12 NMAC, release of any
portion of the audit report by the IPA or agency prior to being officially
released by the state auditor is a violation of Section 12-6-5NMSA 1978 and
requires a compliance finding in the audit report.
(9) In
the event that an agency response to a finding indicates in any way that the
OSA is the cause of the finding, the OSA may require that a written response
from the OSA be included in the report, below the other responses to that
finding.
M. Exit conference and related confidentiality
issues:
(1) The
IPA shall hold an exit conference with representatives of the agency's
governing authority and top management including representatives of any
component units (housing authorities, charter schools, hospitals, foundations,
etc.) if applicable. The OSA has the
authority to notify the agency or IPA that the state auditor shall be informed
of the date of the entrance conference, any progress meetings and the exit
conference. If such notification is received, the IPA and agency shall invite
the state auditor or his designee to attend all such conferences. If component unit representatives cannot
attend the combined exit conference, a separate exit conference shall be held
with the component unit's governing authority and top management. [Unless the cost of the audit is five
thousand dollars ($5,000) or less (excluding GRT), the exit conference shall be
held in person; a telephone or webcam exit conference shall not meet this
requirement.] If extraordinary
circumstances exist that prevent the exit conference from taking place in
person, the IPA shall submit a written request for an exemption from this
requirement to the state auditor at least seven days prior to the scheduled
exit conference. The written request for
the exemption shall include the justification for the request and the
concurring signature of the agency. The
IPA may not hold a telephonic or webcam exit conference without prior written
approval of the state auditor [if the cost of the audit is greater than five
thousand dollars ($5,000)]. The date
of the exit conference(s) and the names and titles of personnel attending shall
be stated in the last page of the audit report.
(2) The
IPA, with the agency’s cooperation, shall provide to the agency for review a
draft of the audit report (stamped “draft”), a list of the “passed audit
adjustments,” and a copy of all the adjusting journal entries at or before the
exit conference. The draft audit report
shall include, at minimum, the following elements: independent auditor’s
report, basic financial statements, audit findings, summary schedule of prior
year audit findings, and the reports on internal control and compliance
required by government auditing standards and uniform guidance.
(3) Agency
personnel and the agency’s IPA shall not release information to the public
relating to the audit until the audit report is released by the OSA, and has
become a public record.
(4) Once
the audit report is officially released to the agency by the state auditor (by a
release letter) and the required waiting period of five calendar days has
passed, unless waived by the agency in writing, the audit report shall be
presented by the IPA, to a quorum of the governing authority of the agency at a
meeting held in accordance with the Open Meetings Act, if applicable. This requirement only applies to agencies
with a governing authority, such as a board of directors, board of county
commissioners, or city council, which is subject to the Open Meetings Act. The IPA shall ensure that the required
communications to those charged with governance are made in accordance with
AU-C 260.12 to 260.14. The final
progress payment of the contact amount will not be authorized by the OSA until
the IPA has submitted the sign in sheet from the governing authority meeting or
written notification from the chairman or treasurer stating that the IPA
presented the audit report in an open meeting.
(5) At
all times during the audit and after the audit report becomes a public record,
the IPA shall follow applicable standards and Section 2.2.2 NMAC regarding the
release of any information relating to the audit. Applicable standards include but are not
limited to the AICPA Code of Conduct ET Section 1.700.001 and related
interpretations and guidance, and GAGAS 4.30-32 and GAGAS 4.40-.44.
N. Possible violations of criminal statutes in
connection with financial affairs:
(1) IPAs
shall comply with the requirements of GAGAS 4.06-.09 relating to fraud,
noncompliance with provisions of laws, regulations, contracts and grant
agreements, and abuse. Relating to
contracts and grant agreements, IPAs shall extend the AICPA requirements
pertaining to the auditors’ responsibilities for laws and regulations to also
apply to consideration of compliance with provisions of contracts or grant
agreements. Concerning abuse, if an IPA
becomes aware of abuse that could be quantitatively, or qualitatively material
to the financial statements or other financial data significant to the audit
objectives, the IPA shall apply audit procedures specifically directed to
ascertain the potential effect on the financial statements or other financial
data significant to the audit objectives.
(2) Pursuant
to Section 12-6-6 NMSA 1978 (criminal violations), an agency or IPA shall
notify the state auditor immediately, in writing, upon discovery of any
violation of a criminal statute in connection with financial affairs. The notification shall include an estimate of
the dollar amount involved and a complete description of the violation, including
names of persons involved and any action taken or planned. The state auditor may cause the financial
affairs and transactions of the agency to be audited in whole or in part
pursuant to Section 12-6-3 NMSA 1978 and Section 2.2.2.15 NMAC. If the state auditor does not designate an
agency for audit, an agency shall follow the provisions of Section 2.2.2.15
NMAC when entering into a professional services contract for a special audit,
performance audit or attestation engagement regarding the financial affairs and
transactions of the agency relating to financial fraud, waste and abuse.
(3) In
accordance with Section 12-6-6 NMSA 1978, the state auditor, immediately upon
discovery of any violation of a criminal statute in connection with financial
affairs, shall report the violation to the proper prosecuting officer and
furnish the officer with all data and information in his possession relative to
the violation.
O. Special revenue funds authority: The authority for creation of special revenue
funds and any minimum balance required shall be shown in the audit report
(i.e., cite the statute number, code of federal regulation, executive order,
resolution number, or other specific authority) on the divider page before the
combining financial statements or in the notes to the financial
statements. This requirement does not
apply to the statewide CAFR.
(1) All
monies coming into all agencies (i.e., vending machines, fees for photocopies,
telephone charges, etc.) shall be considered public monies and be accounted for
as such. For state agencies, all
revenues generated shall be authorized by legislation (MAPS FIN 11.4).
(2) If
the agency has investments in
securities and derivative instruments, the
IPA shall comply with the requirements of AU-C 501.04-.10. If the IPA elects to use the work of an
auditor’s specialist to meet the requirements of AU-C 501, the requirements of
AU-C 620 shall also be met.
(3) Pursuant
to Section 12-6-5NMSA 1978, each audit report shall include a list of
individual deposit and investment accounts held by the agency. The information presented in the audit report
shall include at a minimum:
(a) name
of depository (i.e., bank, credit union, state treasurer, state investment
council, etc.);
(b) account
name;
(c) type
of deposit or investment account (also required in separate component unit
audit reports):
(i) types
of deposit accounts include non-interest bearing checking, interest bearing
checking, savings, money market accounts, certificates of deposit, etc.;
(ii) types
of investment accounts include state treasurer general fund investment pool
(SGFIP), state treasurer local government investment pool (LGIP), U.S. treasury
bills, securities of U.S. agencies such as Fannie Mae (FNMA), Freddie Mac
(FHLMC), government national mortgage association (GNMA), Sallie Mae, small
business administration (SBA), federal housing administration (FHA), etc.
(d) account
balance of deposits and investments as of the balance sheet date;
(e) reconciled
balance of deposits and investments as of the balance sheet date as reported in
the financial statements; and
(f) for
state agencies only, statewide human resources accounting and management
reporting system (SHARE) fund number. In auditing the balance of a state
agency’s investment in the SGFIP, the IPA shall review the individual state
agency’s cash reconciliation procedures and determine whether those procedures
would reduce the agency’s risk of misstatement in the investment in SGFIP, and
whether the agency is actually performing those procedures. The IPA shall also take into consideration
the complexity of the types of cash transactions that the state agency enters
into and whether the agency processes its deposits and payments through
SHARE. The IPA shall use professional
judgment to determine each state agency’s risk of misstatement in the
investment in the SGFIP and write findings and modify opinions as deemed
appropriate by the IPA. The state
auditor requires the IPAs auditing cash of state agencies to obtain a
confirmation of cash at the individual agency level from STO.
(4) Pledged
collateral:
(a) All
audit reports shall disclose applicable collateral requirements in the notes to
the financial statements. In addition, there shall be a supplementary information
schedule or note to the financial statements that discloses the collateral
pledged by each depository for public funds.
The schedule or note shall disclose the type of security (i.e., bond,
note, treasury, bill, etc.), security number, committee on uniform security
identification procedures (CUSIP) number, fair market value and maturity date.
(b) Pursuant
to Section 6-10-17 NMSA 1978, the pledged collateral for deposits in banks and
savings and loan associations shall have an aggregate value equal to one-half
of the amount of public money held by the depository. If this requirement is
not met the audit report shall include a finding. No security is required for the deposit of
public money that is insured by the federal deposit insurance corporation (FDIC)
or the national credit union administration (NCUA) in accordance with Section
6-10-16 NMSA 1978. Collateral
requirements shall be calculated separately for each bank and disclosed in the
notes.
(c) All applicable GASB 40 disclosure requirements
relating to deposit and investment risk shall be met. In accordance with GASBS
40.8, relating to custodial credit risk, the notes to the financial statements
shall disclose the dollar amount of deposits subject to custodial credit risk,
and the type of risk the deposits are exposed to. To determine compliance with the fifty
percent pledged collateral requirement of Section 6-10-17 NMSA 1978, the
disclosure shall include the dollar amount of each of the following for each
financial institution: fifty percent pledged collateral requirement per
statute, total pledged collateral, uninsured and uncollateralized.
(d) Repurchase
agreements shall be secured by pledged collateral having a market value of at
least one hundred two percent of the contract per Subsection H of Section
6-10-10 NMSA 1978. To determine
compliance with the one hundred two percent pledged collateral requirement of
Section 6-10-10 NMSA 1978, the disclosure shall include the dollar amount of
each of the following for each repurchase agreement: one hundred two percent pledged collateral
requirement per statute, total pledged collateral.
(e) Per Section 6-10-16.A NMSA 1978,
“deposits of public money shall be secured by: securities of the United States,
its agencies or instrumentalities; securities of the state of New Mexico, its
agencies, instrumentalities, counties, municipalities or other subdivisions;
securities, including student loans, that are guaranteed by the United States
or the state of New Mexico; revenue bonds that are underwritten by a member of
the financial industry regulatory authority (known as FINRA), and are rated
“BAA” or above by a nationally recognized bond rating service; or letters of
credit issued by a federal home loan bank.”
(f) Securities shall be accepted as
security at market value pursuant to Subsection C of Section 6-10-16 NMSA 1978.
(g) State
agency investments in the state treasurer’s general fund investment pool do not
require disclosure of specific pledged collateral for amounts held by the state
treasurer. However, the notes to the
financial statements shall refer the reader to the state treasurer’s separately
issued financial statements which disclose the collateral pledged to secure
state treasurer cash and investments.
(h) If an agency has
other “authorized” bank accounts, pledged collateral information shall be
obtained from the bank and disclosed in the notes to the financial
statements. The state treasurer monitors
pledged collateral related to most state agency bank accounts. State agencies should not request the pledged
collateral information from the state treasurer. In the event pledged collateral information
specific to the state agency is not available, the following note disclosure shall
be made: detail of pledged collateral specific to this agency is unavailable
because the bank commingles pledged collateral for all state funds it
holds. However, STO’s collateral bureau
monitors pledged collateral for all state funds held by state agencies in such
“authorized” bank accounts.
(5) Agencies
that have investments in the state treasurer’s local government investment pool
shall disclose the information required by GASBS 79 in the notes to their
financial statements. Agencies with
questions about the content of these required note disclosures may contact STO
(http://www.nmsto.gov) for assistance.
(1) Prior year
balance included in budget:
(a) If the agency
prepares its budget on the accrual or modified accrual basis, the statement of
revenues and expenditures (budget and actual) or the budgetary comparisons
shall include the amount of fund balance on the budgetary basis used to balance
the budget.
(b) If the agency
prepares its budget on the cash basis, the statement of revenues and
expenditures (budget and actual) or the budgetary comparisons shall include the
amount of prior-year cash balance used to balance the budget (or fund balance
on the cash basis).
(2) The
differences between the budgetary basis and GAAP basis revenues and expenditures
shall be reconciled. If the required
budgetary comparison information is included in the basic financial statements,
the reconciliation shall be included on the statement itself or in the notes to
the financial statements. If the
required budgetary comparison is presented as RSI, the reconciliation to GAAP
basis shall appear in either a separate schedule or in the notes to the RSI
(AAG SLV 11.14). The notes to the
financial statements shall disclose the legal level of budgetary control for
the entity and any excess of expenditures over appropriations at the legal
level of budgetary control. The legal
level of budgetary control for local governments is at the fund level. The legal level of budgetary control for
school districts is at the function level.
The legal level of budgetary control for state agencies is explained at
Subsection A of Section 2.2.2.12 NMAC.
For additional information regarding the legal level of budgetary
control the IPA may contact the applicable oversight agency (DFA, HED, or PED).
(3) Budgetary
comparisons shall show the original and final appropriated budget (same as
final budget approved by DFA, HED or PED), the actual amounts on the budgetary
basis, and a column with the variance between the final budget and actual
amounts.
(a) If the budget
structure for the general fund and major special revenue funds is similar
enough to the GAAP fund structure to provide the necessary information, the
basic financial statements shall include budgetary comparison statements those
funds.
(b) Budgetary
comparisons for the general fund and major special revenue funds shall be
presented as RSI if the agency budget structure differs from the GAAP fund
structure enough that the budget information is unavailable for the general
fund and major special revenue funds. An
example of this “perspective difference” would occur if an agency budgets by
program with portions of the general fund and major special revenue funds
appearing across various program budgets.
In a case like that the budgetary comparison would be presented for
program budgets and include information in addition to the general fund and
major special revenue funds budgetary comparison data (GASBS 41.03 and .10).
R. Appropriations:
(1) Budget
related findings:
(a) If
actual expenditures exceed budgeted expenditures at the legal level of
budgetary control, that fact shall be reported in a finding and disclosed in
the notes to the financial statements.
(b) If
budgeted expenditures exceed budgeted revenues (after prior-year cash balance
and any applicable federal receivables used to balance the budget), that fact
shall be reported in a finding. This type of finding shall be confirmed with
the agency’s budget oversight entity (if applicable).
(2) Special,
deficiency, specific, and capital outlay appropriations:
(a) Special,
deficiency, specific, and capital outlay appropriations funded by severance tax
bonds or general obligation bonds of the state shall be disclosed in the notes
to the financial statements. The
original appropriation, the appropriation period, expenditures to date,
outstanding encumbrances and unencumbered balances shall be shown in a
supplementary information schedule or in a note to the financial
statements. The accounting treatment of
any unexpended balances shall be fully explained in the supplementary information
schedule or in a note to the financial statements. This is a special requirement of the state
auditor and it does not apply to the statewide CAFR audit.
(b) The
accounting treatment of any unexpended balances shall be fully explained in the
supplementary information schedule or in a note to the financial
statements regarding the special appropriations.
S. Consideration of internal control and risk
assessment in a financial statement audit: Audits performed under this rule shall
include tests of internal controls (manual or automated) over assertions about
the financial statements and about compliance related to laws, regulations, and
contract and grant provisions. IPAs and agencies are encouraged to reference
the U.S. GAOs’ standards for internal
control in the federal government, known as the “green book”, which may be adopted by state, local, and
quasi-governmental entities as a framework for an internal control system.
T. Required auditor's reports:
(1) The
AICPA provides examples of independent auditor’s reports in the appendix to
chapter 4 of AAG GAS and appendix A to chapter 16 of AAG SLV. Guidance is provided in footnote 3 to
appendix A to chapter 16 of AAG SLV regarding wording used when opining on
budgetary statements on the GAAP basis.
IPAs conducting audits under this rule shall follow the AICPA report
examples. All independent auditor’s
reports shall include a statement that the audit was performed in accordance
with auditing standards generally accepted in the United States of America and with applicable government auditing
standards per GAGAS 4.18. This
statement shall be modified in accordance with GAGAS 2.24b if some GAGAS
requirements were not followed. Reports
for single audits of fiscal years beginning on or after December 26, 2014 shall
have references to OMB Circular A-133 replaced with references to Title 2 U.S.
Code of Federal Regulations (CFR) Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance 200.110(b), AAG GAS 4.88 Example 4-1).
(2) The
AICPA provides examples of the report on internal control over financial
reporting and on compliance and other matters based on an audit of financial
statements performed in accordance with government auditing standards in the
appendix to chapter 4 of AAG GAS. IPAs conducting audits under this rule shall
follow the AICPA report examples.
(a) The
state auditor requires the report on internal control over financial reporting
and on compliance and other matters based on an audit of financial statements
performed in accordance with government auditing standards be dated the same
date as the independent auditor’s report.
(b) No
separate management letters shall be issued to the agency by the auditor. Issuance of a separate management letter to
an agency shall be considered a violation of the terms of the audit contract
and may result in further action by the state auditor. See also Subsection F of Section 2.2.2.10
NMAC regarding this issue.
(3) The AICPA
provides examples of the report on
compliance for each major federal program and on internal control over
compliance required by the uniform guidance in the appendix to chapter 13 of AAG
GAS. IPAs conducting audits under this rule shall follow the AICPA report
examples.
(4) The state
auditor requires the financial statements, RSI, SI, and other information
required by this rule, and the following reports to be included under one report cover: the independent auditor’s report;
the report on internal control over financial reporting and on compliance and
other matters based on an audit of financial statements performed in accordance
with government auditing standards; and the report on compliance for each major
federal program and on internal control over compliance required by the uniform
guidance. If applicable, the independent
auditor’s report shall include the AU-C 725 opinion on SI, the schedule of
expenditures of federal awards and the HUD financial data schedule (required by
HUD guidelines on reporting and attestation requirements of uniform financial
reporting standards). The report shall
also contain a table of contents and an official roster. The IPA may submit a written request for an exemption from the “one report cover”
requirement, but shall receive prior written approval from the state auditor in
order to present any of the above information under a separate cover.
U. Disposition
of property:
Sections 13-6-1 and
13-6-2 NMSA 1978 govern the disposition of tangible personal property owned by
state agencies, local public bodies, school districts, and state educational
institutions. At least 30 days prior to
any disposition of property included on the agency inventory list described at
Subsection W of Section 2.2.2.10 NMAC, written notification of the official
finding and proposed disposition duly sworn and subscribed under oath by each
member of the authority approving the action shall be sent to the state
auditor.
(1) All
joint powers agreements (JPA) shall be listed in a supplementary information
schedule in the audit report. The
statewide CAFR schedule shall include JPAs that are significant to the state as
a whole. The schedule shall include the
following information for each JPA: participants; party responsible for operations; description; beginning and ending dates of the JPA; total estimated amount of
project and portion applicable to the agency; amount the agency contributed in
the current fiscal year; audit responsibility; fiscal agent if applicable; and name of government agency where
revenues and expenditures are reported.
(2) For self-insurance obtained under
joint powers agreements, see the GASB Codification Section J50.113.
(3) Joint Powers Agreements
(JPAs) and other intergovernmental agreements reported as agency funds should
be reviewed to determine if a separate audit or agreed upon procedure is
applicable in accordance with the Audit Act, Section 12-6-1 to 12-6-14, NMSA
1978.
(1) The
Audit Act (Section 12-6-10 NMSA 1978) requires agencies to capitalize only
chattels and equipment that cost over five thousand dollars ($5,000). All agencies shall maintain a capitalization
policy that complies with the law. All
agencies shall maintain an inventory listing of capitalized chattels and
equipment that cost over five thousand dollars ($5,000).
(2) Agencies
shall conduct an annual physical inventory of chattels and equipment on the
inventory list at the end of each fiscal year in accordance with the
requirements of Section 12-6-10 NMSA 1978.
The agency shall certify the correctness of the inventory after the
physical inventory. This certification
shall be provided to the agency’s auditors.
The IPA shall audit the inventory listing for correctness and compliance
with the requirements of the Audit Act.
X. Schedule of changes in assets and
liabilities
for agency funds: Agency funds are
excluded from the statement of changes in fiduciary net position (GASBS 34.110
as amended by GASBS 63) because they have no “net position.” It is a requirement of the state auditor that
a schedule of changes in assets and liabilities for agency funds be included as
SI for all agencies that have agency funds, except school districts which are
subject to different requirements. The
schedule shall show additions and deductions for each agency fund. The schedule should appear toward the end of
the table of contents and requires an AU-C 725 opinion in the independent auditor’s
report. The requirements for school
districts regarding the presentation of the statement of changes in assets and
liabilities for agency funds are detailed in Subsection C of 2.2.2.12 NMAC.
Y. Tax increment
development districts: Pursuant to Subsection C of Section 5-15-9
NMSA 1978, tax increment development districts (TIDDs) are political
subdivisions of the state, and they are separate and apart from the
municipality or county in which they are located. Section 5-15-10 NMSA 1978
states that the district shall be governed by the governing body that adopted a
resolution to form the district or by a five-member board composed of four
members appointed by that governing body; provided, however, that the fifth
member of the five-member board is the secretary of finance and administration
or the secretary’s designee with full voting privileges. However, in the case of an appointed board of
directors that is not the governing body, at the end of the appointed
directors’ initial terms, the board shall hold an election of new directors by
majority vote of owners and qualified resident electors. Therefore, a TIDD and its audit firm shall
apply the criteria of GASBS 14, 39, 61, and 80 to determine whether the TIDD is
a component unit of the municipality or county that approved it, or whether the
TIDD is a related organization of the municipality or county that approved
it. If the TIDD is determined to be a
related organization per the GAAP requirements, then the TIDD shall contract
separately for an audit separate from the audit of the municipality or county
that approved it.
Z. GASBS 68, accounting
and financial reporting for pensions:
(1) PERA and ERB
shall each prepare schedules of employer allocations as of June 30 of each
fiscal year. The state auditor requires
the following:
(a) Prior
to distribution of the schedule of employer allocations, PERA and ERB shall
obtain audits of their respective schedules.
These audits shall be conducted in accordance with government auditing standards
and AU-C 805, special considerations - audits of single financial statements
and specific elements, accounts, or items of a financial statement.
(b) Pursuant to AU-C 805.16, the PERA and
ERB auditors shall each issue a separate auditor’s report and express a
separate opinion on the AU-C 805 audit performed (distinct from the agency’s
regular financial statement and compliance audit). Additionally, the auditor
shall apply the procedures required by AU-C 725 to all supplementary
information schedules included in the schedule of employer allocations report
in order to determine whether the supplementary information is fairly stated,
in all material respects, in relation to the financial statements as a
whole. The IPA shall include the
supplementary information schedules in the related reporting in the
other-matter paragraph pursuant to AU-C 725.09, regarding whether such
information is fairly stated in all material respects in relation to the
schedule of employer allocations as a whole.
(c) PERA
and ERB shall include note
disclosures in their respective schedule of employer allocations reports that
detail each component of allocable pension expense at the fund level, excluding
employer-specific pension expense for changes in proportion. Each plan shall also include note disclosures
by fund detailing collective fund-level deferred outflows of resources and
deferred inflows of resources. The
disclosures shall include a summary of changes in the collective deferred and
inflows outflows of resources (excluding employer specific amounts), by year of
deferral.
(d) PERA and ERB
shall each obtain at least one concurring review of their respective schedules
of employer allocations by an outside IPA firm (different from the firm
performing the AU-C 805 audit). The firm
selected to perform the concurring review is subject to OSA approval.
(e) The AU-C 805 audits and resulting
separate reports on the PERA and ERB schedules of employer allocations shall be
submitted to the OSA for review and release pursuant to Subsection A of Section
2.2.2.13 NMAC, prior to distribution to the participant employers.
(f) As soon as the
AU-C 805 reports become public record, PERA and ERB shall make the information
available to their participant employers.
(g) PERA
and ERB shall each prepare an
employer guide that illustrates the correct use of their respective schedule of
employer allocations report by their participant employers. The guides shall explicitly distinguish
between the plan-level reporting and any employer-specific items. The calculations and record-keeping necessary
at the employer level (for adjusting journal entries, amortization of deferred
amounts, etc.) shall be described and illustrated. The employer guides shall be made available
to the participant employers by June 30 of the subsequent fiscal year.
(2) Regarding
whether the pension liability shall be included in the stand-alone financial
statements of funds, see the GASB’s comprehensive implementation guide, chapter
5, question and answer 5.129.1, which says, “except for blended component
units, which are discussed in questions 5.125.2 and 5.125.3, statement 68 does
not establish specific requirements for allocation of the employer's
proportionate share of the collective net pension liability or other
pension-related measures to individual funds.
However, for proprietary and fiduciary funds, consideration shall be
given to NCGA statement 1, paragraph 42, as amended, which requires that
long-term liabilities that are “directly related to and expected to be paid
from” those funds be reported in the statement of net position or statement of
fiduciary net position, respectively.” Stand-alone state agency financial
statements that exclude the proportionate share of the collective net pension
liability of the state of New Mexico based on the above guidance, shall include
note disclosure referring the reader to the statewide CAFR for the state’s net
pension liability and other pension-related information. The stand-alone report for the New Mexico
component appropriation funds shall include note disclosure of the net pension
liability for all the state agencies of the state of New Mexico.
AA. Federal Single Audit: OMB
Circular A-133 audits of states, local governments, and non-profit
organizations has been replaced by Title 2 U.S. Code of Federal Regulations
Part 200, uniform administrative
requirements, cost principles, and audit requirements for federal awards (uniform
guidance). The standards set forth in
Subpart F - audit requirements, became effective December 26, 2013, and apply
to audits of fiscal years beginning on or after December 26, 2014
(calendar-year-end December 31, 2015 and FY16 audits).
BB. GASBS 77: GASB Statement 77, tax abatement disclosures,
is effective for reporting periods beginning after December 15, 2015 (FY17 for
agencies with a June 30 fiscal year end).
The GAO may aggregate, analyze and publish GASBS 77 information. Unaudited, but final, GASBS 77 disclosure
information in the format prescribed below shall be provided to any agency
whose tax revenues are affected by the reporting agency’s tax abatement
agreements no later than September 15 of the subsequent fiscal year. Failure to meet this due date results in a
compliance finding. This due date does
not apply if the reporting agency does not have any tax abatement agreements
that reduce the tax revenues of another agency.
In addition to the requirements of GASBS 77, the state auditor requires:
(1) All tax abatement
agreements entered into by an agency’s component unit(s) shall be disclosed in
the same manner as the tax abatement agreements of the primary government.
[(2) Agencies
that make a GASBS 77 disclosure shall use the template GASBS 77 disclosure
spreadsheet available on the OSA website and submit that electronic file with
the final version of the audit report.]
[(3)] (2) If an agency does
not need to make a GASBS 77 disclosure, that fact shall be disclosed in the
notes to the financial statements.
[(4)] (3) If an agency
determines that any required disclosure is confidential, the agency shall cite
the legal authority for that determination.
[(5)] (4) If an agency has GASBS 77 disclosures to make as an agency that
entered into a tax abatement agreement, all information contained in the OSA
GASBS 77 disclosure spreadsheet must be included in the notes to the financial
statements. If an agency received
intergovernmental disclosures from another agency, all information contained in
the OSA GASBS 77 disclosure spreadsheet must be included in the notes to the
financial statements.
CC. New
standards that become effective in FY[18] 19 for agencies with a
June 30 fiscal year end are:
(1) GASBS
[75] 83, [accounting and financial reporting for
postemployment benefits other than pensions] certain asset retirement
obligations;
(2) GASBS [81,
irrevocable split-interest agreements;] 88; certain disclosures related
to debt including direct borrowings and direct placements; and
(3) [Some
provisions of GASBS 82, pension
issues - an amendment of GASB statements No. 67, No. 68, and No. 73;
(4) GASBS
85, Omnibus 2017;
(5) GASBS
86, certain debt extinguishment
issues;
(6) ]
Implementation Guide No. [2017-1] 2018-1, implementation guidance
update - [2017] 2018. [and]
[(7) Implementation
Guide No. 2017-2, financial reporting for postemployment benefit plans other
than pension plans.]
DD. GASBS 75, accounting and financial
reporting for postemployment benefits other than pensions: The retiree health care authority (RHCA)
shall prepare a schedule of employer allocations as of June 30 of each fiscal
year. The state auditor requires the
following:
(1) Prior
to distribution of the schedule of employer allocations, RHCA shall obtain an
audit of the schedule. This audit shall
be conducted in accordance with government auditing standards and AU-C 805,
special considerations - audits of single financial statements and specific
elements, accounts, or items of a financial statement.
(2) Pursuant to AU-C 805.16, the RHCA
auditors shall issue a separate auditor’s report and express a separate opinion
on the AU-C 805 audit performed (distinct from the agency’s regular financial
statement and compliance audit).
Additionally, the auditor shall apply the procedures required by AU-C
725 to all supplementary information schedules included in the schedule of
employer allocations report in order to determine whether the supplementary
information is fairly stated, in all material respects, in relation to the
financial statements as a whole. The IPA
shall include the supplementary information schedules in the related reporting
in the other-matter paragraph pursuant to AU-C 725.09, regarding whether such
information is fairly stated in all material respects in relation to the
schedule of employer allocations as a whole.
(3) RHCA shall include note disclosures in the
schedule of employer allocations report that detail each component of allocable
OPEB expense at the fund level, excluding employer-specific OPEB expense for
changes in proportion. RHCA shall also include note disclosures by fund
detailing collective fund-level deferred outflows of resources and deferred
inflows of resources. The disclosures
shall include a summary of changes in the collective deferred outflows and inflows
of resources (excluding employer specific amounts), by year of deferral.
(4) RHCA shall each
obtain at least one concurring review of the schedule of employer allocations
by an outside IPA firm (different from the firm performing the AU-C 805
audit). The firm selected to perform the
concurring review is subject to OSA approval.
(5) The AU-C 805 audit and resulting
separate report on the RHCA schedule of employer allocations shall be submitted
to the OSA for review and release pursuant to Subsection A of Section 2.2.2.13
NMAC, prior to distribution to the participant employers.
(6) As soon as the
AU-C 805 reports become public record, RHCA shall make the information
available to its participant employers.
(7) RHCA
shall prepare an employer guide that illustrates the correct use of the
schedule of employer allocations report by its participant employers. The guide shall explicitly distinguish
between the plan-level reporting and any employer-specific items. The calculations and record-keeping necessary
at the employer level (for adjusting journal entries, amortization of deferred
amounts, etc.) shall be described and illustrated. The employer guide shall be made available to
the participant employers by June 30 of the subsequent fiscal year.
[2.2.2.10 NMAC -
Rp, 2.2.2.10 NMAC; A, A, xx/xx/2018]
2.2.2.12 SPECIFIC CRITERIA: The specific criteria described in this
section shall be considered in planning and conducting governmental audits.
These requirements are not intended to be all-inclusive; therefore, OSA
recommends that IPAs review the NMSA and NMAC while planning governmental
audits.
A. Pertaining to audits of state agencies:
(1) Due dates for
agency audits: audit reports of agencies under the oversight of DFA FCD are due
to OSA in accordance with the requirements of Subsection D of Section 12-6-3
NMSA 1978 and Subsection A of Section 2.2.2.9 NMAC.
(2) All the
individual SHARE funds shall be reported in the financial statements, either
within the basic financial statements or as SI.
(3) Accounts payable
at year-end and reversion calculation:
If goods and services were received (as defined by generally accepted
accounting principles) by the end of the fiscal year but not paid for by the
end of the fiscal year, an accounts payable shall be reported for the
respective amount due in both the government-wide financial statements and the
fund financial statements. The “actual” expenditures in the budgetary
comparison exclude any accounts payable that were not paid timely and therefore
require a request to the financial control division to pay prior year bills out
of current year budget. They are paid
out of the budget of the following fiscal year.
An agency’s reversions are calculated using the budgetary basis expenditures because the agency does not have the
legal authority to obligate the state for liabilities once the appropriation
period has lapsed. Thus, the agency
cannot keep the cash related to accounts payable that were not paid
timely. This results in a negative fund
balance in the modified accrual basis financial statements of a reverting fund.
(4) Net position/fund balance:
(a) Pursuant to
GASBS 63.8 the government-wide statement of net position and the proprietary
fund statement of net position show net position as:
(i) net
investment in capital assets as defined by GASBS 63.9;
(ii) restricted
(distinguishing between major categories of restrictions) as defined by GASBS
63.10; and
(iii) unrestricted
as defined by GASBS 63.11.
(b) Governmental
fund financial statement fund balances shall be reported in accordance with
GASBS 54.
(5) Book
of record:
(a) The
state maintains the centralized accounting system SHARE. The SHARE data and reports are the original
book of record that the auditor is auditing.
Each fiscal year, the agency shall record all audit adjusting journal
entries in SHARE. The financial
information in SHARE shall agree to the agency’s audited financial statements,
with the exception of accounts payable as explained in Subsection A of Section
2.2.2.12 NMAC. If the agency maintains a
separate accounting system, it shall be reconciled with the SHARE system and
all applicable adjustments shall be recorded in SHARE in the month in which the
transactions occurred. DFA FCD provides
guidance to agencies, which IPAs shall review, regarding policy and procedure
requirements. These documents are
available on the DFA FCD website and include:
(i) the
manual of model accounting practices (MAPs);
(ii) various
white papers, yearly closing instructions; and
(iii) various
accounting guideline memos.
(b) The
statement of revenues and expenditures in the audit report shall be presented
in accordance with GAAP, by function or program classification and object
code. However, the budgetary comparison
statements shall be presented using the level of appropriation reflected in the
final approved budget. The SHARE chart
of accounts reflects the following appropriation unit levels:
|
Appropriation
unit code/appropriation unit description |
|
|
200 |
personal
services & employee benefits |
|
300 |
contractual
services |
|
400 |
other |
|
500 |
other
financing uses |
|
600 |
non-budgeted |
(c) Revenue
categories of appropriations to state agencies are listed below. The budgetary comparison statements for state
agencies shall be presented in the audit report by the revenue categories shown
below and by the expenditure categories that appear in the agency’s final
approved budget.
(i) state general
fund;
(ii) other state
funds;
(iii) internal service
funds/inter-agency transfers; or
(iv) federal funds.
(d) For more detail
about the SHARE chart of accounts see the DFA website.
(6) Reversions
to state general fund:
(a) All
reversions to the state general fund shall be identified in the financial
statements by the fiscal year of appropriation (i.e., reversion to state
general fund - FY 16). The gross amount
of the appropriation and the gross amount of the reversion shall be shown
separately.
(b) Subsection A of Section 6-5-10 NMSA
1978 states “all unreserved undesignated fund balances in reverting funds and
accounts as reflected in the central accounting system as of June 30 shall
revert by September 30 to the general fund.
The division may adjust the reversion within forty-five days of release
of the audit report for that fiscal year.”
Failure to transfer reverting funds timely in compliance with the
statute requires an audit finding.
(7) Non-reciprocal
(not payments for materials or services rendered) interfund (internal) activity
includes;
(a) transfers;
and
(b) reimbursements
(GASBS 34.410):
(i) intra-agency
transfers between funds within the agency shall offset (i.e. balance). Reasons for intra-agency transfers shall be
fully explained in the notes to the financial statements. In the separate audit reports of state
agencies, transfers between their internal funds are shown as other financing
sources or uses in the fund financial statements and as transfers (that get
eliminated) in the government-wide financial statements;
(ii) inter-agency
transfers (between an agency’s internal funds and other funds of the state that
are outside the agency such as state general fund appropriations, special
appropriations, bond proceeds appropriations, reversions to the state general
fund, and transfers to/from other state agencies) shall be segregated from
intra-agency transfers and fully explained in the notes to the financial
statements along with the agency number and SHARE fund number to whom and from
whom transferred. The transfers may be
detailed in supporting schedules rather than in the notes, but agency and SHARE
fund numbers shall be shown. The
schedule shall be presented on the modified accrual basis. The IPA is responsible for performing audit
procedures on all such inter-agency transfers.
(c) Regarding inter-agency
transfers between legally separate component units and the primary government
(the state of New Mexico):
(i) if the
inter-agency transfer is between a blended component unit of the state and
other funds of the state, then the component unit’s separately issued financial
statements report such activity between itself and the primary government as
revenues and expenses. When the blended
component unit is included in the primary government’s financial statements,
such inter-agency transfers are reclassified as transfers (GASBS 34.318);
(ii) all resource flows between a
discretely presented component unit of the state and other funds of the state
shall be reported as external transactions - revenues and expenses - in the
primary government’s financial statements and the component unit’s separately
issued financial statements (GASBS 34.318);
(d) All transfers to
and from SHARE fund 853, the state general fund appropriation account, shall be
clearly identifiable in the audit report as state general fund appropriations,
reversions, or collections;
(e) Reimbursements
are transfers between funds that are used to reallocate the revenues and
expenditures/expenses to the appropriate fund.
Reimbursements are not reported as inter-fund activity in the financial
statements.
(8) General
services department capital projects: in general, GSD records the state of New
Mexico capitalized land and buildings for which it is responsible, in its
accounting records. The cost of
furniture, fixtures, and moveable equipment owned by agencies is to be
capitalized in the accounting records of the agency that purchased them. The agency shall capitalize those assets
based on actual amounts expended in accordance with GSD instructions issued in
Section 2.20.1.10 NMAC.
(9) State-owned
motor vehicle inventory: successful management of state-owned vehicles pursuant
to the Transportation Services Act (Sections 15-8-1 to 15-8-11 NMSA 1978) is
dependent on reliable and accurate capital assets inventory records and physical
verification of that inventory. Thus,
the annual audit of state agencies shall include specific tests of the
reliability of the capital assets inventory and verification that a physical
inventory was conducted for both the agency's owned vehicles and long-term
leased vehicles.
(10) Independent auditor’s
report: The independent auditor’s report
for state agencies, district attorneys, district courts, and the educational
institutions created by New Mexico Constitution Article XII, Sec. 11 shall include
an emphasis of matter paragraph referencing the summary of significant
accounting principles disclosure regarding the reporting agency. The emphasis of matter paragraph shall
indicate that the financial statements are not intended to present the financial
position and changes in financial position of the primary government, the state
of New Mexico, but just the financial position and the changes in financial
position of the department. The emphasis
of matter paragraph shall follow the example provided in AAG SLV 16.103 ex.
A-17.
(11) Budgetary
basis for state agencies: the state budget is adopted on the modified accrual
basis of accounting except for accounts payable accrued at the end of the
fiscal year that do not get accrued by the statutory deadline per Section
6-10-4 NMSA 1978. Those accounts payable
that do not get paid timely or accrued by the statutory deadline shall be paid
out of the next year’s budget. If an
agency needs to recognize additional accounts payable amounts that were not
accrued by the statutory deadline, then the budgetary statements and the fund
financial statements require a reconciliation of expenditures, as discussed at
Subsection Q of Section 2.2.2.10 NMAC.
All transactions are recorded in the state’s book of record, SHARE,
under the modified accrual basis of accounting except for accounts payable not
meeting the statutory deadline; therefore, the “actual” expenditures in the
budgetary comparison schedules equal the expenditures as recorded in SHARE for
the fund. Encumbrances related to single
year appropriations lapse at year end.
Appropriation periods are sometimes for periods in excess of 12 months
(multiple-year appropriations). When
multiple-year appropriation periods lapse, the authority for the related
budgets also lapse and encumbrances can no longer be charged to those
budgets. The legal level of budgetary
control shall be disclosed in the notes to the financial statements. Per Subsection C of Section 9 of the General
Appropriation Act of 2017, all agencies, including legislative agencies, may
request category transfers among personal services and employee benefits,
contractual services and other.
Therefore, the legal level of budgetary control is the appropriation
program level (A-Code, P-Code, and Z-Code).
A-Codes pertain to capital outlay appropriations (general
obligation/severance tax or state general fund). P-Codes pertain to program/operating funds.
Z-Codes pertain to special appropriations.
The IPA shall compare total expenditures for each program to the
program’s approved final budget to evaluate compliance.
(12) Budgetary
comparisons of state agencies shall show the original and final appropriated
budget (same as final budget approved by DFA), the actual amounts on the
budgetary basis, and a column with the variance between the final budget and
actual amounts. If a state agency
presents budgetary comparisons by fund, the appropriation program code(s)
(A-Code, P-Code, and Z-Code) shall be reported on the budgetary comparison
schedule.
(13) Accounting for special capital outlay
appropriations financed by bond proceeds:
(a) STO administers
the debt service funds for various bond issues that are obligations of the
state of New Mexico. STO does not report
in its departmental financial statements bonds payable that are obligations of
the state of New Mexico. These payables
and the related bond face amounts (proceeds) are reported in the state’s
CAFR. The note disclosures associated
with STO’s departmental financial statements shall explain that, by statute,
STO is responsible for making the state’s bond payments and keeping the related
records; however, it is not responsible for the related debt, the state
is. Additionally, the note disclosures
associated with STO’s departmental financial statements shall refer the reader
to detailed SI in the STO audit report and the statewide CAFR. The STO departmental financial statements
shall include SI regarding the state of New Mexico bond obligations. The SI schedules shall show;
(i) the
beginning and end-of-year bond payable balances, increases and decreases
(separately presented), and the portions of each bond issuance that are due
within one year, as required by GASBS 34.119;
(ii) the
details of debt service requirements to maturity, as required by GASBS 38.10;
and
(iii) any
violations of bond covenants and related actions taken to address violations of
bond covenants, as required by GASBS 38.9 and Section 12-6-5NMSA 1978.
(b) DFA has provided
accounting and reporting guidance for state agencies that receive or administer
special capital outlay appropriations from the state legislature that are
financed by bond proceeds. DFA’s
guidance is available in the “FYI 2008 Audit Forum 9/30/08” section of DFA’s
website at http://www.nmdfa.state.nm.us/Forums.aspx. In the notes to the financial statements,
agencies disclose that the bond proceeds were allocated by the legislature to
the agency to administer disbursements to the project recipients, and the agency
is not obligated in any manner for the related indebtedness. Agencies also disclose the specific revenue
recognition policy for these appropriations.
Each agency’s IPA shall audit the agency’s financial statement
presentation of this capital outlay project information to ensure that they are
presented in accordance with accounting principles that are generally accepted
in the United States.
(14) Amounts “due from other
state agencies” and “due to other state agencies”: if a state agency reports
amounts “due from” or “due to” other state agencies the notes shall disclose
the amount “due to” or “due from” each agency, the name of each agency, the
SHARE fund account numbers, and the purpose of the account balance.
(15) Investments in the
state general fund investment pool (SGFIP): these balances are presented as
cash and cash equivalents in the statements of net position and the balance
sheets of the participant agencies, with the exception of the component
appropriation funds (state general fund).
The notes to the financial statements of the component appropriation
funds shall contain GASBS 40 disclosures for the SGFIP. This disclosure may refer the reader to the
separate audit report for STO for additional information regarding the SGFIP.
(16) Format for the
statement of activities: state agencies
that have more than one program or function shall use the financial statement
format presented in GASBS 34, Illustrations B-1 through B-4. The simplified statement of activities (GASBS
34, Illustration B-5) may not be used for agencies that have multiple programs
or functions. GASBS 34.41 requires governments to report direct expenses for
each function.
(17) Oversight duties of DFA
FCD: on October 3, 2008, the state controller and the state auditor distributed
a letter to agencies regarding FCD’s request for agencies’ draft financial
statements for the preparation of the CAFR for the state. Agencies were concerned about violating
Section 12-6-5NMSA 1978. However, Subsections
of Section 6-5-2.1 NMSA 1978 states that FCD shall “have access to and
authority to examine books, accounts, reports, vouchers, correspondence files
and other records, bank accounts, money and other property of a state
agency.” In addition, Section 6-5-4.1
NMSA 1978 mandates that FCD shall compile the CAFR. After some consideration and discussion of
the conflicting statutes, the state controller and the state auditor concluded
that “pursuant to these rules, Sections 6-5-4.1 and Section 12-6-5NMSA 1978
should be construed to give effect to both statutes and the corresponding
administrative rules. Therefore, an
agency shall provide a copy of its draft audited financial statements to FCD in
order that FCD may compile the CAFR.
However, the agency may only release that information to FCD and not to
the public. The agency’s audit report also is not public record unless released
in accordance with Section 12-6-5NMSA 1978.”
The unaudited draft financial statements submitted to DFA shall exclude
the opinions and findings. The entire
letter is available at: http://www.nmdfa.state.nm.us/uploads/FileLinks/293b21bdbc044c04bd0dbc6de01def7e/DFA-FCD%20Oversight%20Letter.pdf.
B. Pertaining
to audits of housing authorities:
(1) Housing
authorities within the state of New Mexico consist of regional housing
authorities, component units or departments of local governments, component
units of housing authorities, and housing authorities created by
intergovernmental agreements between cities and counties that are authorized to
exercise all powers under the Municipal Housing Law, Section 3-45-1 et seq.
NMSA 1978.
(2) The
financial statements of a housing authority that is a department, program or
component unit of a primary government shall be included in the financial audit
report of the primary government by discrete presentation unless an exemption
from this requirement has been obtained from the state auditor. In the event that a primary government
determines that a housing authority is a department or program of, rather than
a component unit of, the primary government, a request for exemption from the
discrete presentation requirement shall be submitted to the state auditor, by
the primary government. The request for
exemption shall include evidence that the housing authority is not a separate
legal entity from the primary government and that the corporate powers of the
housing authority are held by the primary government. Evidence included in the request shall
address these issues:
(a) the housing authority is not a
corporation registered with the secretary of state;
(b) there was never
a resolution or ordinance making the housing authority a public body corporate;
and
(c) the housing
authority was authorized under Section 3-45-1 et seq. NMSA 1978.
(d) Upon receipt of the exemption granted
by the state auditor from the requirement for discrete presentation, the
housing authority department or program shall be included in the financial
report of the primary government like any other department or program of the
primary government.
(3) Audits of public
housing authorities that are departments of a local government shall be
conducted by the same IPA that performs the audit of the local government. Separate audit contracts shall not be
approved.
(a) Local
governments are encouraged to include representatives from public housing
authorities that are departments of the local government in the IPA selection
process.
(b) The
IPA shall include the housing authority’s governing board and management
representatives in the entrance and exit conferences with the primary government. If it is not possible to hold such combined
conferences, the IPA shall hold separate entrance and exit conferences with
housing authority’s management and a member of the governing board. The OSA has the authority to notify the
agency or IPA that the state auditor shall be informed of the date of the
entrance conference, any progress meetings and the exit conference. If such notification is received, the IPA and
agency shall invite the state auditor or his designee to attend all such
conferences no later than 72 hours before the proposed conference.
(4) The following
information relates to housing
authorities that are component units of a local government.
(a) The housing
authority shall account for financial activity in proprietary funds.
(b) At the public housing authority’s discretion, the agency may
“be audited separately from the audit of its local primary government
entity. If a separate audit is made, the
public housing authority audit shall be included in the local primary government
entity audit and need not be conducted by the same auditor who audits the
financial affairs of the local primary government entity” (Subsection E of
Section 12-6-3 NMSA 1978). Statute
further stipulates in Subsection A of Section 12-6-4 NMSA 1978 that “a public
housing authority other than a regional housing authority shall not bear the
cost of an audit conducted solely at the request of its local primary
government entity.”
(c) Audit reports of separate audits of
component unit housing authorities shall be released by the state auditor
separately from the primary government’s report under a separate release letter
to the housing authority.
(5) Public housing authorities and their
IPAs shall follow the requirements of guidelines
on reporting and attestation requirements of uniform financial reporting
standards (UFRS), which is available on the U.S. department of housing and
urban development’s website under a search for UFRS. Additional administrative issues related to
audits of public housing authorities follow.
(a) Housing authority audit contracts
include the cost of the audit firm’s AU-C 725 opinion on the financial data
schedule (FDS). The preparation and
submission cost for this HUD requirement shall be included in the audit
contract. The public housing authority
shall electronically submit a final approved FDS based on the audited financial
statements no later than nine months after the public housing authority’s
fiscal year end. The IPA shall:
(i) electronically
report on the comparison of the electronic FDS submission in the REAC staging
database through the use of an identification (ID) and password;
(ii) include
a hard copy of the FDS in the audit report;
(iii) render an AU-C 725
opinion on the FDS; and
(iv) explain
in the notes any material differences between the FDS and the financial
statements.
(b) The
IPA shall consider whether any fee accountant used by the housing authority is
a service organization and, if applicable, follow the requirements of AU-C 402
regarding service organizations.
(c) The IPA shall
provide the housing authority with an itemized cost breakdown by program area
for audit services rendered in conjunction with the housing authority.
(6) Single audit
reporting issue: If a single audit is performed
on the separate audit report for the public housing authority, including the
housing authority’s schedule of expenditures of federal awards, the housing
authority federal funds do not need to be subjected a second time to a single
audit during the single audit of the primary government. In this situation, the
housing authority’s federal expenditures do not need to be included in the
primary government’s schedule of expenditures of federal awards. See AAG GAS 6.15 for more information.
C. Pertaining to audits of school districts:
(1) In the event
that a state-chartered charter school subject to oversight by PED is not
subject to the requirement to use the same auditor as PED, that charter school
is reminded that their audit contract shall be submitted to PED for approval. Charter schools shall ensure that sufficient
time is allowed for PED review refer to Subsection F of Section 2.2.2.8 NMAC
for the due date for submission of the audit contract to the OSA.
(2) Regional
education cooperative (REC) audits:
(a) A separate
financial and compliance audit is required on activities of RECs. The IPA shall provide copies of the REC
report to the participating school districts and PED once the report has been
released by the state auditor.
(b) Audits of RECs
shall include tests for compliance with Section 6.23.3 NMAC.
(c) Any ‘on-behalf’
payments for fringe benefits and salaries made by RECs for employees of school
districts shall be accounted for in accordance with GASB Cod. Sec. N50.135 and
communicated to the employer in accordance with GASB Cod. Sec. N50.131.
(d) The audit report
of each REC shall include a cash reconciliation schedule which reconciles the
cash balance as of the end of the previous fiscal year to the cash balance as
of the end of the current fiscal year.
This schedule shall account for cash in the same categories used by the
REC in its monthly cash reports to the PED.
If there are differences in cash per the REC financial statements and
cash per the REC accounting records, the IPA shall provide the adjusting entries
to the REC to reconcile cash per the financial statements to cash per the REC
accounting records. If cash per the REC
accounting records differs from the cash amount the REC reports to PED in the
monthly cash report, the IPA shall issue a finding which explains that the PED
reports do not reconcile to the REC accounting records.
(3) School district
audits shall address the following issues:
(a) Audits of school
districts shall include tests for compliance with Section 6.20.2 NMAC and PED’s
manual of procedures for public schools accounting and budgeting (PSAB), with
specific emphasis on supplement 7, cash controls.
(b) The
audit report of each school district shall include a cash reconciliation
schedule which reconciles the cash balance as of the end of the previous fiscal
year to the cash balance as of the end of the current fiscal year. This schedule is also required for each
charter school chartered by a school district and each charter school chartered
by PED. This schedule shall account for
cash in the same categories used by the district in its monthly cash reports to
PED. Subsection D of Section 6.20.2.13
NMAC states that school districts shall use the “cash basis of accounting for
budgeting and reporting”. The financial
statements are prepared on the accrual basis of accounting. Subsection E of Section 6.20.2.13 NMAC states
that “if there are differences between the financial statements, school
district records and department records, the IPA should provide the adjusting
entries to the school district to reconcile the report to the school district
records.” If there are difference
between the school district records and the PED report amounts, other than
those explained by the adjusting entries, the IPA shall issue a finding which
explains that the PED reports do not reconcile to the school district records.
(c) Any joint
ventures or other entities created by a school district are agencies subject to
the Audit Act.
(d) Agency
fund reporting: under GASBS 34 a statement of changes in fiduciary net position
is required for pension trust funds, investment trust funds, and
private-purpose trust funds. However,
agency funds have no net position and are excluded from this presentation
(GASBS 34.110 as amended by GASBS 63).
It is a requirement of the state auditor that a schedule of changes in
assets and liabilities - agency funds for the fiscal year be included as SI in
the audit report for each school district and each charter school. The schedules shall show the changes (both
additions and deductions) in the agency funds summarized by school or for each
activity. The schedule requires an AU-C
725 opinion in the independent auditor’s report.
(e) Relating
to capital expenditures by the New Mexico public school facilities authority (PSFA),
school districts shall review capital expenditures made by PSFA for repairs and
building construction projects of the school district. School districts shall also determine the
amount of capital expenditures that shall be added to the capital assets of the
school district and account for those additions properly. The IPA shall test the school district
capital asset additions for proper inclusion of these expenditures.
(f) Functions
of the general fund: school district audit reports shall include individual
fund financial statements and budgetary comparisons for the following functions
of the general fund: operational,
transportation, instructional materials and teacherage (if applicable).
(4) Pertaining
to charter schools:
(a) A charter school
is a conversion school or start-up school within a school district authorized
by the local school board or PED to operate as a charter school. A charter school is considered a public
school, accredited by the state board of public education and accountable to
the school district’s local school board, or PED, for ensuring compliance with
applicable laws, rules and charter provisions.
A charter school is administered and governed by a governing body in a
manner set forth in the charter.
(b) Certain GASBS 14
criteria (as amended by GASBS 39, 61, and 80) shall be applied to determine
whether a charter school is a component unit of the chartering entity (the
district or PED). The chartering agency
(primary government) shall make the determination whether the charter school is
a component unit of the primary government.
(c) No charter school that has been
determined to be a component unit may be omitted from the financial statements
of the primary government based on materiality.
All charter schools that are component units shall be included in the
basic financial statements using one of the presentation methods described in
GASBS 34.126, as amended.
D. Pertaining
to audits of counties: Tax roll reconciliation county
governments: Audit reports for counties
shall include two supplementary information schedules.
(1) The
first one is a “tax roll reconciliation of changes in the county treasurer’s
property taxes receivable” showing the June 30 receivable balance and a
breakout of the receivable for the most recent fiscal year ended, and a total
for the previous nine fiscal years. Per
Subsection C of Section 7-38-81 NMSA 1978, property taxes that have been
delinquent for more than 10 years, together with any penalties and interest,
are presumed to have been paid.
(2) The
second schedule titled “county treasurer’s property tax schedule” shall show by
property tax type and agency, the amount of taxes: levied; collected in the current year;
collected to-date; distributed in the current year; distributed to-date; the
amount determined to be uncollectible in the current year; the uncollectible
amount to-date; and the outstanding receivable balance at the end of the fiscal
year. This information is necessary for proper
revenue recognition on the part of the county as well as on the part of the
recipient agencies, under GASBS 33. If
the county does not have a system set up to gather and report the necessary
information for the property tax schedule, the IPA shall issue a finding.
E. Pertaining
to audits of educational
institutions:
(1) Educational
institutions are reminded that audit contracts shall be submitted to HED for
approval. Refer to Subsection F of
Section 2.2.2.8 NMAC for the due date for submission of the audit contract to
the OSA.
(2) Budgetary
comparisons: the legal level of
budgetary control per Section 5.3.4.10 NMAC shall be disclosed in the notes to
the financial statements. The state
auditor requires that every educational institution’s audit report include
budgetary comparisons as SI. The
budgetary comparisons shall be audited and an auditor’s opinion shall be
rendered. An AU-C 725 opinion does not
meet this requirement. The budgetary
comparisons shall show columns for: the original budget; the revised budget;
actual amounts on the budgetary basis; and a variance column. The IPA shall confirm the final adjusted and
approved budget with HED. The IPA shall
compare the financial statement budget comparison to the related September 15
budget submission to HED. The only differences that should exist between the
HED budget submission and the financial statement budgetary comparisons are
adjustments made by the institution after September 15 and audit
adjustments. If the HED budget
submission does not tie to the financial statement budgetary comparison, taking
into account only those differences, then the IPA shall write a related
finding. A reconciliation of actual
revenue and expense amounts on the budgetary basis to the GAAP basis financial statements
shall be disclosed at the bottom of the budgetary comparisons or in the notes
to the financial statements. The
reconciliation is required only at the “rolled up” level of “unrestricted and
restricted - all operations” and shall include revenues and expenses. HED approved the following categories which
shall be used for the budgetary comparisons.
(a) Unrestricted and restricted - All
operations (schedule 1): beginning
fund balance/net position; unrestricted
and restricted revenues; state
general fund appropriations; federal
revenue sources; tuition and fees; land and permanent fund; endowments and private gifts; other; total unrestricted & restricted revenues; unrestricted and restricted expenditures; instruction; academic
support; student services; institutional support; operation and maintenance of plant; student social & cultural
activities; research; public service; internal services; student aid, grants & stipends; auxiliary services; intercollegiate athletics; independent operations; capital outlay; renewal & replacement; retirement
of indebtedness; total unrestricted
& restricted expenditures; net transfers; change in fund balance/net position (budgetary basis); ending fund
balance/net position.
(b) Unrestricted
instruction & general (schedule 2);
beginning fund balance/net position;
unrestricted revenues; tuition; miscellaneous fees; federal government appropriations; state government appropriations; local government appropriations; federal government contracts/grants; state government contracts/grants; local government contracts/grants; private contracts/grants; endowments; land & permanent fund; private
gifts; sales and services; other; total unrestricted revenues;
unrestricted expenditures; instruction; academic support; student services; institutional
support; operation & maintenance
of plant; total unrestricted expenditures;
net transfers; change in fund
balance/net position (budgetary basis); ending
fund balance/net position.
(c) Restricted
instruction & general (schedule 3);
beginning fund balance/net position;
restricted revenues; tuition; miscellaneous fees; federal government appropriations; state government appropriations; local government appropriations; federal government contracts/grants; state government contracts/grants; local government contracts/grants; private contracts/grants; endowments; land & permanent fund; private
gifts; sales and services; other; total restricted revenues; restricted
expenditures; instruction; academic support; student services; institutional
support; operation & maintenance
of plant; total restricted
expenditures; net transfers; change in fund balance/net position
(budgetary basis); ending fund balance/net position.
(3) Educational
institutions shall present their financial statements using the business type
activities model.
(4) Compensated absence liability is
reported as follows: the statement of net position reflects the current portion
of compensated absences under current liabilities and the long-term portion of
compensated absences under noncurrent liabilities.
(5) Component
unit issues: educational institutions shall comply with the requirements of
Subsection A of Section 2.2.2.10 NMAC.
Additionally:
(a) individual component unit budgetary
comparisons are required if the component unit has a “legally adopted budget.” A component unit has a legally adopted budget
if it receives any federal funds, state funds, or any other appropriated funds
whose expenditure authority derives from an appropriation bill or ordinance
that was signed into law; and
(b) there is no level of materiality for
reporting findings of component units that do not receive public funds. All component unit findings shall be
disclosed in the primary government’s audit report.
(6) Management
discussion and analysis (MD&A): The
MD&A of educational institutions shall include analysis of significant
variations between original and final budget amounts and between final budget
amount and actual budget results. The
analysis shall include any currently known reasons for those variations that
are expected to have a significant effect on future services or liquidity.
(7) Educational
institutions established by Section 11 of Article XII of the New Mexico state
constitution shall provide the department of finance and administration’s
financial control division with a draft copy of their financial statements
excluding opinions and findings, pursuant to Subsection A of Section 2.2.2.12
NMAC.
F. Pertaining
to audits of hospitals: hospitals subject to this rule shall prepare indigent care cost and funding reports and
calculations of cost of providing
indigent care worksheets schedules in accordance with the definitions for
indigent care cost and funding components and the applicable financial
assistance policies, using the form provided by the OSA, for the three-year
period ending June 30 of the year under audit. These schedules shall be
included as supplementary information in the audit report and the auditor shall
apply the procedures required by AU-C 725 in order to determine whether the
schedules are fairly stated, in all material respects, in relation to the
financial statements as a whole. The IPA shall include these supplementary
information schedules in the related reporting in the other-matter paragraph
pursuant to AU-C 725.09, regarding whether such information is fairly stated in
all material respects in relation to the financial statements as a whole. The
IPA shall submit an electronic excel version of the indigent care schedules
using the form provided by the OSA with the final PDF version of the audit
report as required by Subsection B of Section 2.2.2.9 NMAC. If a hospital
subject to the requirements of this subsection is a component unit of another
government, and the component unit issues a separate audit report outside of
the primary government’s audit report, the primary government is not required
to include this information in its audit report. The GAO may aggregate, analyze and publish
indigent care information. IPAs performing audits of hospitals shall perform
the procedures described below.
(1) On the indigent care cost and funding reports:
(a) recalculate the mathematical
accuracy;
(b) compare funding amounts associated
with Legislative appropriations to the amounts listed in the corresponding New
Mexico Appropriations Act;
(c) compare amounts listed under ‘funding
for indigent care’ to supporting detail;
(d) compare amounts listed under ‘cost of
providing indigent care’ to the calculations
of cost of providing indigent care worksheets;
(e) compare the
amounts listed under ‘patients receiving indigent care services’ to supporting
detail.
(2) On the calculations of cost of providing indigent care worksheets: compare amounts listed under each line item
to supporting detail by patient account.
(3) Select a sample of the supporting
detail by patient account associated with the calculations of cost of providing indigent care worksheets and
perform the following procedures on the sampled items:
(a) obtain documentation supporting
management’s determination that the patient qualified for indigent care and
compare with the policies in effect during the three‐year period ending June
30 of the year under audit;
(b) compare the
total charges on the patient’s account to the supporting detail;
(c) note if a co‐pay was required from
the patient in accordance with the policies. Obtain information from management
as to whether any required payment was received. If a payment was received,
compare it to the supporting detail provided for the ‘funding for indigent
care’ on the indigent care cost and
funding reports;
(d) for ‘direct
costs paid to other providers on behalf of patients qualifying for indigent
care’, compare the costs to supporting invoices;
(e) obtain
supporting information with respect to each percentage listed under ‘ratio of
cost to charges’. Compare the support to
the calculation of the percentage and recalculate the mathematical accuracy of
the percentage.
G. Pertaining
to audits of investing agencies: Investing agencies, which are defined as STO,
PERA, ERB, and the state investment council, shall prepare schedules of asset management costs which include management fee
information by investment class.
(1) For all asset classes except private
asset classes and alternative investment classes, the schedules shall, at
minimum, include the following information:
(a) relating to consultants: the name of
the firm or individual, the location of the consultant (in-state or
out-of-state), a brief description of investments subject to the agreement, and
fees;
(b) relating to
third-party marketers (as defined in
Section 6-8-22 NMSA 1978): the name of the firm or individual, the location of
the marketer (in-state or out-of-state), a brief description of investments
subject to the agreement, and any fees, commissions or retainers;
(c) relating to
traditional asset classes: name of the investment, asset class, value of the
investment, and fees (including both “direct” and “embedded” costs).
(2) For private asset classes and
alternative investment classes, the schedules shall, at minimum, include the
following information:
(a) relating to consultants: the
aggregate fees by asset class and consultant location (in-state or
out-of-state), and a brief description of investments included in each asset
class;
(b) relating to
third-party marketers (as defined in
Section 6-8-22 NMSA 1978): aggregate fees, commissions and retainers by asset
class and third-party marketer location (in-state or out-of-state), and a brief
description of investments included in each asset class;
(c) relating to
alternative asset classes: the total fees by asset class (including both
“direct” and “embedded” costs), and a brief description of the investments
included in each asset class.
(3) These schedules shall be included as
unaudited other information in the audit report. The IPA shall submit an
electronic excel version of the schedules of asset management costs using the
form provided by the OSA with the final PDF version of the audit report as
required by Subsection B of Section 2.2.2.9 NMAC. The GAO may aggregate, analyze and publish
asset management cost information.
H. Pertaining to audits of local public
bodies: Budgetary
comparisons; auditors shall test local public body budgets for compliance with
required reserves and disclose those reserves on the face of the financial
statements and in notes financial statements (if applicable).
[2.2.2.12 NMAC,
Rp, 2.2.2.12 NMAC; A, xx/xx/2018]
2.2.2.15 SPECIAL AUDITS, ATTESTATION ENGAGEMENTS, PERFORMANCE AUDITS AND FORENSIC AUDITS:
A. Fraud, waste or abuse in government
reported by agencies, IPAs or members of the public:
(1) Definition of fraud: Fraud includes, but is not limited to,
fraudulent financial reporting, misappropriation of assets, corruption, and use
of public funds for activities prohibited by the constitution or laws of the
state of New Mexico. Fraudulent
financial reporting means intentional misstatements or omissions of amounts or
disclosures in the financial statements to deceive financial statement users,
which may include intentional alteration of accounting records,
misrepresentation of transactions, or intentional misapplication of accounting
principles. Misappropriation of assets
means theft of an agency’s assets, including theft of property, embezzlement of
receipts, or fraudulent payments.
Corruption means bribery and other illegal acts. (GAO-14-704G federal
internal control standards paragraph 8.02).
(2) Definitions
of waste and abuse: Waste is the act of
using or expending resources carelessly, extravagantly, or to no purpose. Abuse involves behavior that is deficient or
improper when compared with behavior that a prudent person would consider
reasonable and necessary operational practice given the facts and
circumstances. This includes the misuse
of authority or position for personal gain or for the benefit of another. Waste
and abuse do not necessarily involve fraud or illegal acts. However, they may be an indication of
potential fraud or illegal acts and may still impact the achievement of defined
objectives. (GAO-14-704G federal internal control standards paragraph 8.03).
(3) Reports of fraud, waste &
abuse: Pursuant to the authority set
forth Section 12-6-3 NMSA 1978, the state auditor may conduct initial
fact-finding procedures in connection with reports of financial fraud, waste
and abuse in government made by agencies, IPAs or members of the public. Reports may be made telephonically or in
writing through the fraud hotline or website established by the state auditor
for the confidential reporting of financial fraud, waste, and abuse in
government. Reports may be made
telephonically to the fraud hotline by calling 1-866-OSA-FRAUD (1-866-672-3728)
or reported in writing through the state auditor’s website at www.saonm.org. Reports received or created by the state auditor
are audit information and audit documentation in connection with the state
auditor’s statutory duty to examine and audit the financial affairs of every
agency, or in connection with the state auditor’s statutory discretion to audit
the financial affairs and transactions of an agency in whole or in part.
(4) Confidential sources: The identity of a person making a report
directly to the state auditor orally or in writing, or telephonically or in
writing through the state auditor’s fraud hotline or website, alleging
financial fraud, waste, or abuse in government is confidential audit
information and may not be disclosed, unless the person making the report
agrees to the disclosure of that person's name.
(5) Confidentiality of files: A report alleging financial fraud, waste, or
abuse in government that is made directly to the state auditor orally or in
writing, or telephonically or in writing through the state auditor’s fraud
hotline or website, any resulting special audit, performance audit, attestation
engagement or forensic audit, and all records and files related thereto are
confidential audit documentation and may not be disclosed prior to the release
of an audit report, except to an independent auditor, performance audit team or
forensic audit team in connection with a special audit, performance audit,
attestation engagement, forensic audit or other existing or potential
engagement regarding the financial affairs or transactions of an agency.
(6) The
OSA may make inquiries of agencies as part of the fact-finding process
performed by the OSA’s special investigations division. Agencies shall respond
to OSA inquiries within [twenty one (21)] five (5) calendar days
of receipt. IPAs shall test compliance
with this requirement and report noncompliance as a finding in the annual
financial and compliance audit report.
B. Special
audit or attestation examinations, performance audits and
forensic audits:
(1) Designation: Pursuant to Section 12-6-3 NMSA 1978, in
addition to the annual audit, the state auditor may cause the financial affairs
and transactions of an agency to be audited in whole or in part. Accordingly, the state auditor may designate
an agency for special audit, attestation engagement, performance audit or
forensic audit regarding the financial affairs and transactions of an agency or
local public body based on information or a report received from an agency, IPA
or member of the public. For purposes of
this rule, the term “special audit, attestation engagement, performance audit
or forensic audit” includes, without limitation, agreed-upon procedures,
consulting, and contract close-out (results-based award) engagements that
address financial fraud, waste or abuse in government. The state auditor shall inform the agency of
the designation by sending the agency a notification letter. The state auditor may specify the audit
subject matter, the scope and any procedures required, the AICPA professional
standards that apply, and for a performance audit, performance aspects to be included
and the potential findings and reporting elements that the auditors expect to
develop. Pursuant to Section 200.503 of
Uniform Guidance, if a single audit was previously performed, the special
audit, attestation engagement, performance audit or forensic audit shall be
planned and performed in such a way as to build upon work performed, including
the audit documentation, sampling, and testing already performed by other
auditors. The attestation and
performance audit engagements may be conducted pursuant to government auditing
standards if so specified by the OSA.
(2) Costs: All reasonable costs of special audits,
attestation engagements, forensic audits, or single-entity performance audits
conducted pursuant to this section shall be borne by the agency audited
pursuant to Section 12-6-4 NMSA 1978.
The state auditor, in its sole discretion, may apportion among the
entities audited some or all of the reasonable costs of a multi-entity
performance audit.
(3) Who performs the
engagement: The state auditor may
perform the special audit, attestation engagement, performance audit or
forensic audit, alone or with other professionals selected by the state
auditor. Alternatively, the state
auditor may require the engagement to be performed by an IPA or a team that may
be comprised of any of the following: independent public accountants;
individuals with masters degrees or doctorates in a relevant field such as
business, public administration, public policy, finance, or economics;
individuals with their juris doctorate; CFE-certified fraud examiners;
CFF-certified forensic auditors; CIA-certified internal auditors; or other
specialists. If the state auditor
designates an agency for an engagement to be conducted by an IPA or
professional team, the agency shall:
(a) upon receipt of
notification to proceed from the state auditor, identify all elements or
services to be solicited, obtain the state auditor’s written approval of the
proposed scope of work, and request quotations or proposals for each applicable
element of the engagement;
(b) follow
all applicable procurement requirements which may include, but are not limited
to, Uniform Guidance, Procurement Code (Section 13-1 NMSA 1978), or equivalent
home rule procurement provisions when selecting an IPA or team to perform the
engagement;
(c) submit the following information to
the state auditor by the due date specified by the state auditor:
(i) a
completed [recommendation form] template for special audits,
attestation engagements, performance audits or forensic audits (the form)
provided at www.osanm.org, which the agency shall print on agency letterhead;
and
(ii) a completed
audit contract form including the contract fee, start and completion date, and
the specific scope of services to be performed in the format prescribed by the
OSA, provided at www.osanm.org, with all required
signatures on the contract.
(d) If
the agency fails to select an IPA and submit the [recommendation form and]
signed contract to OSA by the due date specified by the state auditor, or, if
none within 60 days of notification of designation from the state auditor, the
state auditor may conduct the audit or select the IPA for that agency in
accordance with the process described at Subsection F of Section 2.2.2.8 NMAC.
(4) Errors: [Recommendation forms and contracts]
Contracts that are submitted to the OSA with errors or omissions shall be
rejected by the state auditor. The state
auditor shall return the rejected [recommendation form and] contract to
the agency indicating the reason(s) for the rejection.
(5) Recommendation
rejections: In the event the agency’s
recommendation is not approved by the state auditor, the state auditor shall
promptly communicate the decision, including the reason(s) for rejection, to
the agency, at which time the agency shall promptly submit a different
recommendation. This process shall
continue until the state auditor approves a recommendation and related
contract. During this process, whenever
a recommendation and related contract are not approved, the agency may submit a
written request to the state auditor for reconsideration of the
disapproval. The agency shall submit its
request no later than 15 calendar days from the date of the disapproval and
shall include documentation in support of its recommendation. If warranted, after review of the request,
the state auditor may hold an informal meeting to discuss the request. The state auditor shall set the meeting in a
timely manner with consideration given to the agency’s circumstances.
(6) Contract
Amendments: Any proposed contract amendments shall be
processed in accordance with Subsection N of Section 2.2.2.8 NMAC.
(7) Access to
records and documents: For any special
audit, attestation engagement, performance audit or forensic audit, the state
auditor and any engaged professionals shall have available to them all
documents necessary to conduct the special audit, attestation engagement,
performance audit or forensic audit.
Furthermore, pursuant to Section 12-6-11 NMSA 1978, when necessary for a
special audit, attestation engagement, performance audit or forensic audit, the
state auditor may apply to the district court of Santa Fe county for issuance
of a subpoena to compel the attendance of witnesses and the production of books
and records.
(8) Entrance,
progress and exit conferences: The IPA
or other professional shall hold an entrance conference and an exit conference
with the agency, unless the IPA or other professional has submitted a written
request to the state auditor for an exemption from this requirement and has
obtained written approval of the exemption.
The OSA has the authority to notify the agency or IPA or other
professional that the state auditor shall be informed of the date of the
entrance conference, any progress meetings and the exit conference. If such notification is received, the IPA or
other professional and the agency shall invite the state auditor or his
designee to attend all such conferences no later than 72 hours before the proposed
conference or meeting. The state auditor
may also require the IPA or other professional to submit its audit plan to the
state auditor for review and approval.
(9) Required
reporting: All reports for special
audits, attestation engagements, performance audits, or forensic audits related
to financial fraud, waste or abuse in government undertaken pursuant to Section
2.2.2.15 NMAC (regardless of whether they are conducted pursuant to AICPA
standards for consulting services or for attestation engagements) shall report
as findings any fraud, illegal acts, non-compliance or internal control
deficiencies, pursuant to Section 12-6-5NMSA 1978. Each finding shall comply with the
requirements of Subsection L of Section 2.2.2.10 NMAC.
(10) Report review: The state auditor shall review reports of any
special audit, attestation engagement, performance audit or forensic audit made
pursuant to this section for compliance with the professional services contract
and this rule. Upon completion of the
report, the IPA or other professional shall deliver the organized and bound
report to the state auditor with a copy of any signed management representation
letter. Unfinished or excessively deficient reports shall be rejected by the
state auditor. If the report is rejected
the firm shall submit an electronic version of the corrected rejected report
for state auditor review. The name of
the electronic file shall be “corrected rejected report” followed by the agency
name and fiscal year. The IPA or other
professional shall respond to all review comments as directed by the state
auditor.
(11) Report release: After
OSA’s review of the report for compliance with the professional services
contract and this rule, the state auditor shall authorize the IPA to print and
submit the final report. [The
required number of hardcopies specified in the professional services contract
and an] An electronic version of the report, in the PDF format
described at Subsection B of Section 2.2.2.9 NMAC, shall be delivered to the
state auditor within five business days.
The state auditor shall not release the report until all the required
documents are received by the state auditor.
The state auditor shall provide the agency with a letter authorizing
final payment to the IPA and the release of the report pursuant to Section
12-6-5NMSA 1978. Agency and local public
body personnel shall not release information to the public relating to the
special audit, attestation engagement, performance audit or forensic audit
engagement until the report is released and has become a public record pursuant
to Section 12-6-5NMSA 1978. Except for
the exception under Subsection B of Section 2.2.2.15 NMAC, at all times during
the engagement and after the engagement report becomes a public record, the IPA
or other professional(s) shall not disclose to the public confidential
information about the auditee or about the engagement. Confidential information
is information that is not generally known to the public through common means
of providing public information like the news media and internet.
(12) Disclosure by
professionals: The IPA or other
professional shall not disclose confidential information provided to them by
the state auditor unless otherwise specified by the state auditor. Disclosure of confidential information by the
IPA or other professional may result in legal action by the state auditor, or
in the case of an IPA, restriction pursuant to Subsection D of Section 2.2.2.8
NMAC.
(13) Payment: Progress payments up to (but not including)
ninety percent of the contract amount do not require state auditor approval and
may be made by the agency if the agency monitors the progress of the services
procured. If requested by the state
auditor, the agency shall provide a copy of the approved progress billing(s). Final payments of ninety percent and above
may be made by the agency only after the state auditor has stated in a letter
to the agency that the report has been released by the state auditor.
C. Agency-initiated
special audits, attestation engagements, performance audits and forensic audits:
(1) Applicability: With the exception of agencies that are
authorized by statute to conduct performance audits and forensic audits, this
section applies to all instances in which an agency enters into a professional
services contract for a special audit, attestation engagement, performance
audit, or forensic audit relating to financial fraud, waste or abuse, but the
agency has not been designated by the state auditor for the engagement pursuant
to Subsection B of Section 2.2.2.15 NMAC.
For purposes of this rule, the term “special audit, attestation
engagement, performance audit or forensic audit” includes, without limitation,
agreed-upon procedures, consulting, and contract close-out (results-based
award) engagements that address financial fraud, waste or abuse in government.
(2) Contracting: An agency, IPA or other professional shall
not enter into a professional services contract for a special audit,
attestation engagement, performance audit, or forensic audit regarding the
financial affairs and transactions of an agency and relating to financial
fraud, waste or abuse in government without the prior written approval of the
state auditor. The proposed professional
services contract shall be submitted to the state auditor for review and
approval after it has been signed by the agency and the IPA or other
professional, unless the agency or IPA or other professional applies to the
state auditor for an exemption and the state auditor grants the exemption. When contracting with an IPA or other professional,
the agency shall contract only with an IPA or other professional that has been
approved by the state auditor to conduct such work. The state auditor may, in its sole
discretion, require a non-IPA professional to submit proof of qualifications, a
firm profile or equivalent documentation prior to approving the contract. The contract shall include the contract fee,
start and completion date, and the specific scope of services to be performed,
and shall follow any template that the state auditor may provide.
(3) Applicability
of other rules: The provisions outlined
in Subsection B of Section 2.2.2.15 NMAC apply to agency-initiated special
audits, attestation engagements, performance audits and forensic audits.
[2.2.2.15 NMAC -
Rp, 2.2.2.15 NMAC; A, A, xx/xx/2018]
2.2.2.16 ANNUAL FINANCIAL PROCEDURES
REQUIRED FOR LOCAL PUBLIC BODIES WITH ANNUAL REVENUES LESS THAN FIVE HUNDRED
THOUSAND DOLLARS ($500,000) (TIERED SYSTEM):
A. Annual revenue
determines type of financial reporting: All local public bodies shall comply with the
requirements of Section 6-6-3 NMSA 1978. Pursuant to Section 12-6-3 NMSA 1978,
the annual revenue of a local public body determines the type of financial
reporting a local public body shall submit to the OSA. Local public bodies are mutual domestic water
consumers associations, land grants, incorporated municipalities, and special
districts. The annual revenue of a local
public body shall be calculated on a cash basis inclusive of state grants
but excluding capital outlay funds, federal and private grants. If a local public body reporting under the
requirements of 2.2.2.16 NMAC is a fiscal agent, the fiscal agent must include
the revenues and capital outlays of agencies for which it is fiscally
responsible. For the purpose of
Section 2.2.2.16 NMAC “capital outlay” is funding provided through capital
appropriations of the New Mexico legislature. For the purpose of Section
2.2.2.16 NMAC “private grant” means funding provided by a non-governmental
entity.
B. Determination of revenue and services: Annually, following the procedures described
in Subsection F of Section 2.2.2.8 NMAC, the state auditor shall provide local
public bodies written authorization to obtain services to conduct a financial
audit or other procedures. Upon receipt
of the authorization, a local public body shall determine its annual revenue in
accordance with Subsection A of Section 2.2.2.16 NMAC. The following requirements for financial
reporting apply to the following annual revenue amounts (tiers):
(1) if a local
public body’s annual revenue is less than ten thousand dollars ($10,000) and
the local public body did not directly expend at least fifty percent of, or the
remainder of, a single capital outlay award, then the local public body is
exempt from submitting a financial report to the state auditor, except as
otherwise provided in Subsection C of Section 2.2.2.16 NMAC;
(2) if a local
public body’s annual revenue is ten thousand dollars ($10,000) or more but less
than fifty thousand dollars ($50,000), then the local public body is exempt
from submitting a financial report to the state auditor, except as otherwise
provided in Subsection C of Section 2.2.2.16 NMAC;
(3) if a local public body’s annual
revenue is less than fifty thousand dollars ($50,000), and the local public
body expended at least fifty percent of, or the remainder of, a single capital
outlay award during the fiscal year, then the local public body shall
procure the services of an IPA for the performance of a tier three agreed upon
procedures engagement in accordance with the audit contract for a tier three
agreed upon procedures engagement;
(4) if a local
public body’s annual revenue is greater than fifty thousand dollars ($50,000)
but less than two hundred-fifty thousand dollars ($250,000), then the local
public body shall procure the services of an IPA for the performance of a tier
four agreed upon procedures engagement in accordance with the audit contract
for a tier four agreed upon procedures engagement;
(5) if a local
public body’s annual revenue is greater than fifty thousand dollars ($50,000)
but less than two hundred-fifty thousand dollars ($250,000), and the local
public body expended any capital outlay funds during the fiscal year,
then the local public body shall procure the services of an IPA for the
performance of a tier five agreed upon procedures engagement in accordance with
the audit contract for a tier five agreed upon procedures engagement;
(6) if a local public body’s annual
revenue is two hundred-fifty thousand dollars ($250,000) or greater, but less
than five hundred thousand dollars ($500,000), the local public body shall
procure services of an IPA for the performance of a tier six agreed upon
procedures engagement in accordance with the audit contract for a tier six
agreed upon procedures engagement;
(7) if a local
public body’s annual revenue is five hundred thousand dollars ($500,000) or
more, this section shall not apply and the local public body shall procure
services of an IPA for the performance of a financial and compliance audit in
accordance with other provisions of this rule;
(8) not-withstanding
the annual revenue of a local public body, if the local public body expended
seven hundred-fifty thousand dollars ($750,000) or more of federal funds
subject to a federal single audit during the fiscal year then the local public
body shall procure a single audit.
C. Exemption from financial reporting:
A local public body that is exempt from financial reporting
to the state auditor pursuant to Subsection B of Section 2.2.2.16 NMAC shall
submit written certification to LGD and the state auditor. The certification
shall be provided on the form made by the state auditor, available through
OSA-Connect. The local public body shall
certify, at a minimum:
(1) the local public body’s annual
revenue for the fiscal year; and
(2) that
the local public body did not expend fifty percent of or the remainder of a
single capital outlay award during the fiscal year.
D. Procurement of IPA services: A local public body required to obtain an
agreed-upon procedures engagement shall procure the services of an IPA in
accordance with Subsection F of Section 2.2.2.8 NMAC.
E. Requirements of the IPA selected to perform
the agreed-upon procedures:
(1) The
IPA shall provide the local public body with a dated engagement letter during
the planning stages of the engagement, describing the services to be
provided. See Subsection F of Section
2.2.2.10 NMAC for applicable restrictions on the engagement letter.
(2) The IPA may not
subcontract any portion of the services to be performed under the contract with
the local public body except for the activation of a contingency subcontractor
form in the event the IPA is unable to complete the engagement.
(3) The IPA shall hold an entrance
conference and an exit conference with the local public body unless the IPA has
submitted a written request to the OSA for an exemption from this requirement
and has obtained written approval of the exemption from the OSA. Unless the cost of the AUP is five thousand
dollars ($5,000) (excluding GRT) or less, the exit conference shall be held in
person; a telephone or webcam exit conference shall not meet this
requirement. The OSA has the authority
to notify the agency or IPA that the state auditor shall be informed of the
date of the entrance conference, any progress meetings and the exit
conference. If such notification is
received, the IPA and agency shall invite the state auditor or his designee to
attend all such conferences no later than 72 hours before the proposed
conference or meeting.
(4) The IPA shall submit the report to
the OSA for review in accordance with the procedures described at Subsection B
of Section 2.2.2.9 NMAC. Before submitting the report to OSA for review, the
IPA shall review the report using the AUP report review guide available on the
OSA’s website at www.saonm.org. The
report shall be submitted to the OSA for review with the completed AUP report
review guide. Once the audit report is
officially released to the agency by the state auditor (by a release letter)
and the required waiting period of five calendar days has passed, unless waived
by the agency in writing, the audit report shall be presented by the IPA, to a
quorum of the governing authority of the agency at a meeting held in accordance
with the Open Meetings Act, if applicable.
This requirement only applies to agencies with a governing authority,
such as a board of directors, board of county commissioners, or city council,
which is subject to the Open Meetings Act.
The IPA shall ensure that the required communications to those charged
with governance are made in accordance with AU-C 260.12 to 260.14.
(1) Progress
payments up to ninety percent of the contract amount do not require state
auditor approval and may be made by the local public body if the local public
body ensures that progress payments made do not exceed the percentage of work
completed by the IPA. If requested by
the state auditor, the local public body shall provide the OSA a copy of the
approved progress billing(s).
(2) Final
payments from ninety percent to one hundred percent may be made by the local
public body only after the state auditor has stated in a letter to the local
public body that the agreed-upon procedures report has been released by the
state auditor and the [engagement and ] management representation letter
have been received by the state auditor.
G. Report due dates, notification letters and
confidentiality:
(1) For local public bodies with a June
30 fiscal year-end that qualify for the tiered system, the report or
certification due date is December 15.
Local public bodies with a fiscal year end other than June 30 shall
submit the agreed-upon procedures report or certification no later than five
months after the fiscal year-end. Late
agreed-upon procedures reports (not the current reporting period) are due not
more than six months after the date the contract was executed. An organized bound hard copy of the report
shall be submitted to the OSA.
Agreed-upon procedures reports submitted via fax or email shall not be
accepted. A copy of the signed dated
management representation letter shall be submitted with the report. If a due date falls on a weekend or holiday,
or if the OSA is closed due to inclement weather, the report is due the
following business day by 5:00 pm. If
the report is mailed to the state auditor, it shall be postmarked no later than
the due date to be considered filed by the due date. If the due date falls on a weekend or holiday
the audit report shall be postmarked by the following business day.
(2) As soon as the
IPA becomes aware that circumstances exist that will make the local public
body’s agreed-upon procedures report be submitted after the applicable due date,
the auditor shall notify the state auditor and oversight agency of the
situation in writing. This notification
shall consist of a letter, not an email.
However, a scanned version of the official letter sent via email is
acceptable. There shall be a separate
notification for each late agreed-upon procedures report. The notification shall include a specific
explanation regarding why the report will be late, when the IPA expects to
submit the report and a concurring signature by the local public body. If the IPA will not meet the expected report
submission date, then the IPA shall send a revised notification letter. In the event the contract was signed after
the report due date, the notification letter shall still be submitted to the
OSA explaining the reason the agreed-upon procedures report will be submitted
after the report due date. A copy of the letter shall be sent to the LGD, if
LGD oversees the local public body. The
late report notification letter is not required if the report was submitted to
the OSA for review by the deadline, and then rejected by the OSA, making the
report late when resubmitted.
(3) Local public body personnel shall not
release information to the public relating to the agreed-upon procedures
engagement until the report is released and has become a public record pursuant
to Section 12-6-5NMSA 1978. At all times
during the engagement and after the agreed-upon procedures report becomes a
public record, the IPA shall follow applicable professional standards and
Section 2.2.2 NMAC regarding the release of any information relating to the
agreed-upon procedures engagement.
H. Findings: All agreed upon procedures engagements shall
report as findings any fraud, illegal acts, non-compliance or internal control
deficiencies, consistent with Section 12-6-5NMSA 1978. The findings shall include the required
content listed at Subsection L of Section 2.2.2.10 NMAC.
I. Review of agreed-upon procedures reports
and related workpapers: Agreed-upon procedures reports shall be
reviewed by the OSA for compliance with professional standards and the
professional services contract.
Noncompliant reports shall be rejected and not considered received. Such reports shall be returned to the firm
and a copy of the rejection letter shall be sent to the local public body. If the OSA rejects and returns an agreed upon
procedures report to the IPA, the report shall be corrected and resubmitted to
the OSA by the due date, or the IPA shall include a finding for non-compliance
with the due date. The IPA shall submit
an electronic version of the corrected rejected report for OSA review. The name of the electronic file shall be
“corrected rejected report” followed by the agency name and fiscal year. The OSA encourages early submission of
reports to avoid findings for late reports.
After its review of the agreed-upon procedures report for compliance
with professional standards and the professional services contract, the OSA
shall authorize the IPA to print and submit the final report. [The required number of hardcopies of the
final report as specified in the professional services contract, an electronic
excel version of the findings summary form and an] An electronic
version of the agreed upon procedures report, in PDF format as described at
Subsection B of Section 2.2.2.9 NMAC, shall all be delivered to the OSA within
five business days. The OSA shall not
release the agreed-upon procedures report until the electronic version of the
report is received by the OSA. The OSA
shall provide the local public body with a letter authorizing the release of
the report after the required five day waiting period, and final payment to the
IPA. Released reports may be selected by
the OSA for comprehensive report and workpaper reviews. After such a comprehensive report and
workpaper review is completed, the OSA shall issue a letter to advise the IPA
about the results of the review. The IPA
shall respond to all review comments as directed. If during the course of its review, the OSA
finds significant deficiencies that warrant a determination that the engagement
was not performed in accordance with provisions of the contract, applicable
AICPA standards, or the requirements of this rule, any or all of the following
action(s) may be taken:
(1) the IPA may be
required to correct the deficiencies in the report or audit documentation, and
reissue the agreed upon procedures report to the agency and any others
receiving copies;
(2) the IPA’s
eligibility to perform future engagements may be limited in number or type of
engagement pursuant to Subsection D of Section 2.2.2.8 NMAC;
(3) for future
reports, for some or all contracts, the IPA may be required to submit working
papers with the reports for review by the OSA prior to the release of the
report; or
(4) the IPA may be referred
to the New Mexico public accountancy board for possible licensure action.
J. IPA Independence: IPA’s that perform agreed-upon procedure
engagements under Section 2.2.2.16 NMAC shall maintain independence in fact and
appearance, in all matters relating to the engagement.
(1) An
IPA who performs the local public body’s annual agreed-upon procedures
engagement shall not enter into any special audit or non-attest service
contracts with that local public body without the prior written approval of the
state auditor.
(2) To
obtain this approval, the IPA shall follow the requirements set forth in
Subsection L of Section 2.2.2.8 NMAC.
[2.2.2.16 NMAC,
Rp, 2.2.2.16, 2/27/2018; A, xx/xx/2018]