NM State Auditor Hector Balderas delivers report to the NMFA Board, 12/14/12
It looks like there was plenty of blame to go around at the New Mexico Finance Authority (NMFA) but at least there doesn’t appear to be any money missing.
That’s the upshot of a long-awaited report from the State Auditor’s Office released Friday (Dec. 14) in Santa Fe looking into how and why a faked audit was issued by the NMFA earlier this year that put the state’s bond ratings in jeopardy.
State auditor Hector Balderas told the NMFA Board that it “should hold management accountable” for the bogus audit that came to light this past summer after “a series of red flags” were ignored by executives, the NMFA’s accounting firm at the time and the authority’s own auditing committee.
“This is painful to watch,” board member John Bemis said. “At every level, people could have done more to prevent this.”
On the positive side of the ledger, the report — which interviewed 42 current and former employees as well as board members at NMFA and combed through 250,000 e-mails — did not produce any evidence that theft or embezzlement occurred at the agency that handles millions of dollars in loans and bonds to municipalities across New Mexico.
NMFA Board meeting, 12/14/12
“We operated on the assumption they were falling behind” on an overdue audit, Balderas said, reporting that the investigation indicated that former NMFA controller Greg Campbell “acted alone” when he falsified an audit.
But the fact that the bogus audit was not detected for months, the Office of State Auditor report said, indicated that former CEO Rick May and former chief operating officer John Duff were not “sufficiently engaged … and allowed Campbell to exploit the situation.”
The report also mentioned that the NMFA audit committee “did not raise questions and neither did the NMFA Board.”
Two weeks ago, Campbell admitted to falsifying an internal 2012 audit and was sentenced to five years of probation after pleading guilty to three felony charges in district court in Santa Fe.
May and Duff were fired from their positions by the NMFA board and May has steadfastly maintained that the board is using him as a scapegoat since the controversy came to light this summer.
But Balderas criticized May and Duff on Friday:
We’ve e-mailed May and will post his response as soon as we get it.
Update: May responded by saying the auditor’s report confirmed “there was no major scandal, just the inappropriate actions of a rogue employee.” In a news release, May went on to say it was “simply not true” that he had received an e-mail from the Department of Finance Authority alerting him that the audit had not been filed. “Placing trust and confidence in employees who have long and stellar records of outstanding service is what every management team must do to maintain operational efficiency in any organization, but those same managers never have the benefit of perfect hindsight to guarantee that something inappropriate will never occur,” May said.
As for the future of the state’s bond ratings — which have been closely watched by the Wall Street firms of Moody’s and Standard & Poor’s — the State Auditor and NMFA officials think the news that no money is missing will assure the ratings agencies to maintain the state’s current ratings.
“I believe that they will react positively to this well reasoned report confirming that NMFA’s core operations were not compromised,” Michael Zavelle, Chief Financial Strategist at NMFA, said in a statement released by the authority.
“We have already taken a number of actions to strengthen fiscal oversight and assure compliance with laws and rules governing our audits and financial activity,” NMFA Board Chair Nann Winter said in the same news release, adding, “Lax supervision and a casual attitude toward the audit statutes and rules are a thing of the past.”
***
NMFA officials say the complete, 170-page report from the Office of the State Auditor will be posted online at the department website (http://www.saonm.org/) later today.
And here’s the news release from Rick May:
PressRelaseforDecember14,2012andStateAudior'sSpecialAudit Final.PDF
