2019 New Mexico Statutes
Chapter 12 - Miscellaneous Public Affairs Matters
Article 6 - Audit Act
Section 12-6-3 - Annual and special audits; financial examinations.

A. Except as otherwise provided in Subsection B of this section, 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. The comprehensive annual financial report for the state 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. The audits shall be conducted in accordance with generally accepted auditing standards and rules issued by the state auditor.

B. The examination of the financial affairs of a local public body shall be determined according to its annual revenue each year. All examinations and compliance with agreed-upon procedures shall be conducted in accordance with generally accepted auditing standards and rules issued by the state auditor. If a local public body has an annual revenue, calculated on a cash basis of accounting, exclusive of capital outlay funds, federal or private grants or capital outlay funds disbursed directly by an administrating agency, of:

(1) less than ten thousand dollars ($10,000) and does not directly expend at least fifty percent of, or the remainder of, a single capital outlay award, it is exempt from submitting and filing quarterly reports and final budgets for approval to the local government division of the department of finance and administration and from any financial reporting to the state auditor;

(2) at least ten thousand dollars ($10,000) but less than fifty thousand dollars ($50,000), it shall comply only with the applicable provisions of Section 6-6-3 NMSA 1978;

(3) less than fifty thousand dollars ($50,000) and directly expends at least fifty percent of, or the remainder of, a single capital outlay award, it shall submit to the state auditor a financial report consistent with agreed-upon procedures for financial reporting that are:

(a) focused solely on the capital outlay funds directly expended;

(b) economically feasible for the affected local public body; and

(c) determined by the state auditor after consultation with the affected local public body;

(4) at least fifty thousand dollars ($50,000) but not more than two hundred fifty thousand dollars ($250,000), it shall submit to the state auditor, at a minimum, a financial report that includes a schedule of cash basis comparison and that is consistent with agreed-upon procedures for financial reporting that are:

(a) narrowly tailored to the affected local public body;

(b) economically feasible for the affected local public body; and

(c) determined by the state auditor after consultation with the affected local public body;

(5) at least fifty thousand dollars ($50,000) but not more than two hundred fifty thousand dollars ($250,000) and expends any capital outlay funds, it shall submit to the state auditor, at a minimum, a financial report that includes a schedule of cash basis comparison and a test sample of expended capital outlay funds and that is consistent with agreed-upon procedures for financial reporting that are:

(a) narrowly tailored to the affected local public body;

(b) economically feasible for the affected local public body; and

(c) determined by the state auditor after consultation with the affected local public body;

(6) at least two hundred fifty thousand dollars ($250,000) but not more than five hundred thousand dollars ($500,000), it shall submit to the state auditor, at a minimum, a compilation of financial statements and a financial report consistent with agreed-upon procedures for financial reporting that are:

(a) economically feasible for the affected local public body; and

(b) determined by the state auditor after consultation with the affected local public body; or

(7) five hundred thousand dollars ($500,000) or more, it shall be thoroughly examined and audited as required by Subsection A of this section.

C. 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.

D. Annual financial and compliance audits of agencies under the oversight of the financial control division of the department of finance and administration shall be completed and submitted by an agency and independent auditor to the state auditor no later than sixty days after the state auditor receives notification from the financial control division to the effect that an agency's books and records are ready and available for audit. The local government division of the department of finance and administration shall inform the state auditor of the compliance or failure to comply by a local public body with the provisions of Section 6-6-3 NMSA 1978.

E. In order to comply with United States department of housing and urban development requirements, the financial affairs of a public housing authority that is determined to be a component unit in accordance with generally accepted accounting principles, other than a housing department of a local government or a regional housing authority, at the public housing authority's discretion, 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.

F. The state auditor shall notify the legislative finance committee and the public education department if:

(1) a school district, charter school or regional education cooperative has failed to submit a required audit report within ninety days of the due date specified by the state auditor; and

(2) the state auditor has investigated the matter and attempted to negotiate with the school district, charter school or regional education cooperative but the school district, charter school or regional education cooperative has not made satisfactory progress toward compliance with the Audit Act.

G. The state auditor shall notify the legislative finance committee and the secretary of finance and administration if:

(1) a state agency, state institution, municipality or county has failed to submit a required audit report within ninety days of the due date specified by the state auditor; and

(2) the state auditor has investigated the matter and attempted to negotiate with the state agency, state institution, municipality or county but the state agency, state institution, municipality or county has not made satisfactory progress toward compliance with the Audit Act.

History: 1953 Comp., § 4-31-3, enacted by Laws 1969, ch. 68, § 3; 2003, ch. 273, § 18; 2007, ch. 240, § 1; 2009, ch. 273, § 1; 2009, ch. 283, § 3; 2011, ch. 106, § 6.

Compiler's notes. — During calendar years 1992 and 1993 the District Court for the First Judicial District entered three orders in Vigil v. King, SF 92-1487(C), prescribing the procedure to be followed for selecting independent auditors for state agencies and local public bodies. In summary, the court orders provided:

If a state agency or local public body is notified that it has been designated for audit to be conducted by an independent auditor, the state agency or local public body shall select and submit the name of an independent auditor to the state auditor. The state auditor may, within five days after receipt of the state agency's or local public body's selection, disapprove of the choice of the agency or local public body. A disapproval must be in writing and set forth the reason(s) for disapproval. A disapproval is subject to judicial review;

If the state auditor finds that a state agency or local public body audit is not being conducted in accordance with generally accepted auditing standards or pursuant to the auditing contract between the parties, the state auditor may either complete the audit or contract with another independent auditor to complete the audit. If the state auditor contracts with another independent auditor, the contract amount is limited to the remaining amount owed on the original auditor contract;

The state auditor, pursuant to the Procurement Code, may, under conditions specified in the order, contract with independent auditors to assist the state auditor in conducting any special audit pursuant to 12-6-3 NMSA 1978. The state agency being audited is not a party to this contract. The total cost of the contract entered into by the state auditor cannot exceed 25% of the contract amount provided in the agreement between the state auditor and the agency to be audited.

The 2011 amendment, effective July 1, 2012, required the state auditor to notify the legislative finance committee and the public education department if a school or educational cooperative has not made satisfactory progress to comply with the Audit Act and to notify the legislative finance committee and the secretary of finance and administration if a state agency, state institution, municipality or county has not timely submitted an audit report and has not made satisfactory progress to comply with the Audit Act.

The 2009 amendment, effective July 1, 2010, in Subsection A, at the beginning of the sentence, added "Except as otherwise provided in Subsection B of this section"; added Subsection B; and in Subsection D, added the last sentence.

Temporary provisions. — Laws 2009, ch. 283, § 4 provided that compliance of a local public body not in compliance with the Audit Act between January 1, 2007 and June 30, 2010 is waived for those years if the local public body complies with the applicable provisions of that act in effect on or after July 1, 2010, unless the local public body is required to receive a full financial and compliance audit pursuant to the provisions of that act in effect on or after July 1, 2010.

The 2007 amendment, effective June 15, 2007, added Subsection D.

The 2003 amendment, effective July 1, 2003, in Subsection A, inserted the second sentence and inserted "and rules issued by the state auditor" at the end; and added Subsection C.

No waiver of immunity under Tort Claims Act. — Because state auditor was acting within his scope of duty in commissioning a special audit and publishing the report, no waiver of immunity exists under the Tort Claims Act for claims of defamation. Vigil v. State Auditor's Office, 2005-NMCA-096, 138 N.M. 63, 116 P.3d 854, cert. denied, 2005-NMCERT-007, 138 N.M. 952, 117 P.3d 952.

Purely statutory duties of auditor may be transferred. — New Mexico Const., art. V, § 1, in designating the executive offices of state government, among which is the office of state auditor, is silent as to the duties appertaining to the office of state auditor. This being so, the legislature had power to transfer purely statutory duties of the office previously performed by the auditor to another officer of its own choosing. Torres v. Grant, 1957-NMSC-061, 63 N.M. 106, 314 P.2d 712.

State auditor may accept federal audit at his option. — The state auditor is fully authorized by Subsection A of this section to accept the annual federal audit of employment security commission (now employment security division) funds as an approved independent audit. He is not, however, required to do so and may authorize an audit by personnel designated by him. 1970 Op. Att'y Gen. No. 70-33.

Section prevails over limitation on divulging information. — The legislature manifests a clear intent in this section that the state auditor have available to him all documents necessary to perform a thorough audit of every governmental entity in accordance with generally accepted auditing standards. The policy is expressed strongly enough so that this section must prevail over 3-38-8 NMSA 1978 (relating to divulging information) (repealed in 1981) to the extent of any repugnancy between the two provisions; therefore the state auditor is authorized to examine tax documents generated pursuant to 3-38-1 to 3-38-12 NMSA 1978 (now 3-38-1 to 3-38-6 NMSA 1978) insofar as such examination is required by generally accepted auditing standards. 1978 Op. Att'y Gen. No. 78-22.

Designation of agency to choose its own auditor. — The decision whether the state auditor's office will perform the audit or whether the agency may contract out rests within the state auditor's discretion. Once he has given his written approval to the agency's contract with an independent auditor and said contract has been enacted, however, he may not thereafter revoke the designation. 1987 Op. Att'y Gen. No. 87-54.

Auditor's revocation of designation of independent auditor. — If the state auditor revokes his designation of an agency to choose its own auditor, he may conduct the audit himself, through personnel of his office, or with the assistance of independent auditors under contract with his office. 1987 Op. Att'y Gen. No. 87-54.

Auditor's refusal of approval of independent auditor. — The state auditor may refuse to approve the choice of independent auditor by an agency for any of the reasons provided in SA Rule 87-2 (now 2.2.2.8 NMAC). He is limited to those reasons, because he has, by adopting that rule, committed himself to comply with it until it is changed; however, he is not required to disclose which reason or reasons formed the basis for his decision. 1987 Op. Att'y Gen. No. 87-54.

Directing agency to choose its own auditor. — In carrying out the requirement set forth in the Audit Act (12-6-1 to 12-6-14 NMSA 1978) to audit the financial affairs of each state agency on a yearly basis, the procedures employed by the State Auditor in creating a pool of independent auditors and then directing agencies to contract with auditors he designated from the pool violated the requirements of the Procurement Code (13-1-23 et seq. NMSA 1978). 1992 Op. Att'y Gen. No. 92-06 (but see compiler's notes) (decided under former law).

New Mexico municipal self-insurers' fund. — The New Mexico municipal self insurers' fund, formed under the provisions of Section 11-1-3 NMSA 1978, authorizing governing bodies to exercise joint powers, and Article 62, Chapter 3 NMSA 1978, governing municipal insurance, is an "agency," as defined in this section and is, therefore, subject to audit by the state auditor under this section. 1987 Op. Att'y Gen. No. 87-65.

The New Mexico Military Institute Foundation, Inc., is not an "agency" and, therefore, is not subject to audit by the state auditor. 1988 Op. Att'y Gen. No. 88-79.

Sanitary Projects Act associations. — Associations created pursuant to the Sanitary Projects Act (3-29-1 NMSA 1978 et seq.) are subject to audit under this article. 1990 Op. Att'y Gen. No. 90-30.

Water and sanitation districts created by the Water and Sanitation District Act (73-21-1 NMSA 1978 et seq.) are subject to audit under this article. 1990 Op. Att'y Gen. No. 90-30.

Acequias under Sections 73-2-1 to 73-2-64 NMSA 1978 are subject to audit under this article. 1990 Op. Att'y Gen. No. 90-30.

State auditor and conservation district supervisors have statutory duty to audit district. — Both the state auditor and the soil and water conservation district supervisors have an express statutory duty to have district financial affairs audited: the primary responsibility for having the audits performed should be borne by the district supervisors, but the ultimate responsibility lies with the state auditor, who is responsible for ensuring that every agency's financial records are examined and audited. 1980 Op. Att'y Gen. No. 80-19.

Soil and Water Conservation Act creates exception to annual audit. — The apparent conflict between the annual auditing requirement in the Audit Act and the five-year audit exception in the Soil and Water Conservation District Act is easily resolved by applying the well-settled rule of statutory construction that, where there is no clear intention to the contrary, specific statutes prevail over general statutes, regardless of when enacted; consequently, the auditing requirements of the Soil and Water Conservation District Act, Section 73-20-41C(2) NMSA 1978 (now 73-20-41F(2)), apply since it is the more specific statute. 1980 Op. Att'y Gen. No. 80-19.