SB 145

                                1  SENATE BILL 145
                                2      57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026
                                3  INTRODUCED BY
                                4        George K. Muñoz and Pamelya Herndon and Cynthia Borrego
                                5
                                6
                                7
                                8
                                9
                                10  AN ACT
                                11   RELATING TO AUDITING; PROVIDING FOR FEDERAL SINGLE AUDITS;
                                12   AMENDING THE AUDIT ACT; RESTRUCTURING AUDIT REQUIREMENTS;
                                13   AMENDING LOCAL PUBLIC BODY AUDIT THRESHOLDS; AMENDING
                                14   DEFINITIONS; UPDATING TERMS; AMENDING AUDIT REPORTING
                                15   REQUIREMENTS; AMENDING THE AUDIT FUND; MAKING AN APPROPRIATION.
                                16
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                                17   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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                                18        SECTION 1.     Section 12-6-2 NMSA 1978 (being Laws 1969,
                                19   Chapter 68, Section 2, as amended) is amended to read:
                                20        "12-6-2.     DEFINITIONS.--As used in the Audit Act:
                                21  A.    "agency" means:
                                22  (1)   any department, institution, board,
                                23   bureau, court, commission, district or committee of [the
                                24   government of] the state, including district courts, magistrate
                                25   or metropolitan courts, district attorneys and charitable
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                                1    institutions [for which appropriations are made by the
                                2    legislature] funded by appropriation;
                                3  (2)   any political subdivision of the state,
                                4    created under either general or special act, that receives or
                                5    expends public money from [whatever source derived] any source,
                                6    including counties, county institutions, boards, bureaus or
                                7    commissions [municipalities; drainage, conservancy, irrigation
                                8    or other special districts] and school districts;
                                9  (3)   any entity or instrumentality of the state
                                10   specifically provided for by law, including the New Mexico
                                11   finance authority, the New Mexico mortgage finance authority
                                12   and the New Mexico lottery authority;
                                13  (4)   any organization subject to the
                                14   requirements of Section 6-5A-1 NMSA 1978 that supports a public
                                15   post-secondary educational institution; and
                                16  [(4)] (5)   every office or officer of any
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                                17   entity listed in Paragraphs (1) through [(3)] (4) of this
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                                18   subsection; and
                                19  B.   "local public body" means a mutual domestic
                                20   water consumers association, a land grant, an incorporated
                                21   municipality, an acequia or a special district, including:
                                22  (1)   a drainage district;
                                23  (2)   a conservancy district;
                                24  (3)   an irrigation district;
                                25  (4)   a sanitation district;
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                                1  (5)    a solid waste district;
                                2  (6)    a transit district;
                                3  (7)    a zoning district;
                                4  (8)    a utility district;
                                5  (9)    a communication district;
                                6  (10)   a public improvement district; or
                                7  (11)   a tax increment development district."
                                8  SECTION 2.     Section 12-6-3 NMSA 1978 (being Laws 1969,
                                9    Chapter 68, Section 3, as amended) is amended to read:
                                10        "12-6-3.     ANNUAL AND SPECIAL AUDITS--FINANCIAL
                                11   EXAMINATIONS.--
                                12  A.    Except as otherwise provided in Subsection B of
                                13   this section, the financial affairs of every agency shall be
                                14   thoroughly examined and audited each year by the state auditor,
                                15   personnel of the state auditor's office designated by the state
                                16   auditor, [or] independent auditors approved by the state
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                                17   auditor or personnel of the state auditor's office designated
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                                18   by the state auditor working jointly with independent auditors
                                19   approved by the state auditor.     The annual comprehensive
                                20   [annual] financial report for the state shall be thoroughly
                                21   examined and audited each year by the state auditor, personnel
                                22   of the state auditor's office designated by the state auditor,
                                23   [or] independent auditors approved by the state auditor or
                                24   personnel of the state auditor's office designated by the state
                                25   auditor working jointly with independent auditors approved by
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                                1    the state auditor.     The audits shall be conducted in accordance
                                2    with generally accepted auditing standards, generally accepted
                                3    government auditing standards and rules [issued] promulgated by
                                4    the state auditor; provided that for fiscal year 2028 and each
                                5    fiscal year thereafter, in accordance with Section 6-5-4.1 NMSA
                                6    1978, the financial control division of the department of
                                7    finance and administration shall conduct an annual agency
                                8    federal single audit in accordance with the Federal Single
                                9    Audit Act (31 U.S.C. 7501 through 7507), as amended, and Title
                                10   2, Subtitle A, Chapter II, Part 200, Subpart F, as amended.
                                11  B.   The examination of the financial affairs of a
                                12   local public body shall be determined according to its cash and
                                13   investments assets, annual revenue or federal expenditures each
                                14   year.   All examinations and compliance with agreed-upon
                                15   procedures engagements shall be conducted in accordance with
                                16   generally accepted auditing standards, generally accepted
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                                17   government auditing standards and rules issued by the state
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                                18   auditor.   If a local public body has an annual revenue,
                                19   calculated on a cash basis of accounting, exclusive of capital
                                20   outlay funds, federal or private grants or capital outlay funds
                                21   disbursed directly by an administrating agency, of:
                                22  (1)    less than [ten thousand dollars ($10,000)]
                                23   one hundred thousand dollars ($100,000) and does not directly
                                24   expend at least fifty percent of, or the remainder of, a single
                                25   capital outlay award, it is exempt from submitting and filing
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                                1    quarterly reports and final budgets for approval to the local
                                2    government division of the department of finance and
                                3    administration and from any financial reporting to the state
                                4    auditor;
                                5  [(2)   at least ten thousand dollars ($10,000)
                                6    but less than fifty thousand dollars ($50,000), it shall comply
                                7    only with the applicable provisions of Section 6-6-3 NMSA 1978;
                                8  (3)    less than fifty thousand dollars ($50,000)
                                9    and directly expends at least fifty percent of, or the
                                10   remainder of, a single capital outlay award, it shall submit to
                                11   the state auditor a financial report consistent with agreed-
                                12   upon procedures for financial reporting that are:
                                13  (a)   focused solely on the capital outlay
                                14   funds directly expended;
                                15  (b)   economically feasible for the
                                16   affected local public body; and
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                                17  (c)   determined by the state auditor
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                                18   after consultation with the affected local public body;
                                19  (4)    at least fifty thousand dollars ($50,000)
                                20   but not more than two hundred fifty thousand dollars
                                21   ($250,000), it shall submit to the state auditor, at a minimum,
                                22   a financial report that includes a schedule of cash basis
                                23   comparison and that is consistent with agreed-upon procedures
                                24   for financial reporting that are:
                                25  (a)   narrowly tailored to the affected
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                                1    local public body;
                                2  (b)   economically feasible for the
                                3    affected local public body; and
                                4  (c)   determined by the state auditor
                                5    after consultation with the affected local public body;
                                6  (5)   at least fifty thousand dollars ($50,000)
                                7    but not more than two hundred fifty thousand dollars ($250,000)
                                8    and expends any capital outlay funds, it shall submit to the
                                9    state auditor, at a minimum, a financial report that includes a
                                10   schedule of cash basis comparison and a test sample of expended
                                11   capital outlay funds and that is consistent with agreed-upon
                                12   procedures for financial reporting that are:
                                13  (a)   narrowly tailored to the affected
                                14   local public body;
                                15  (b)   economically feasible for the
                                16   affected local public body; and
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                                17  (c)   determined by the state auditor
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                                18   after consultation with the affected local public body;
                                19  (6)   at least two hundred fifty thousand
                                20   dollars ($250,000) but not more than five hundred thousand
                                21   dollars ($500,000), it shall submit to the state auditor, at a
                                22   minimum, a compilation of financial statements and a financial
                                23   report consistent with agreed-upon procedures for financial
                                24   reporting that are:
                                25  (a)   economically feasible for the
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                                1    affected local public body; and
                                2  (b)   determined by the state auditor
                                3    after consultation with the affected local public body; or
                                4  (7)   five hundred thousand dollars ($500,000)
                                5    or more, it shall be thoroughly examined and audited as
                                6    required by Subsection A of this section]
                                7  (2)   less than one hundred thousand dollars
                                8    ($100,000) and directly expends at least fifty percent, or the
                                9    remainder, of a single capital outlay award, the local public
                                10   body shall submit to the state auditor a financial report
                                11   consistent with agreed-upon procedures for the financial
                                12   reporting that are:
                                13  (a)   focused solely on the capital outlay
                                14   funds directly expended;
                                15  (b)   economically feasible for the
                                16   affected local public body; and
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                                17  (c)   determined by the state auditor
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                                18   after consultation with the affected local public body;
                                19  (3)   more than or equal to one hundred thousand
                                20   dollars ($100,000) but less than one million dollars
                                21   ($1,000,000), the local public body shall submit to the state
                                22   auditor, at a minimum, a financial report that includes a
                                23   schedule of cash basis comparisons and a test sample of any
                                24   expended capital outlay funds and that is consistent with
                                25   agreed-upon procedures for financial reporting that are:
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                                1  (a)   narrowly tailored to the affected
                                2    local public body;
                                3  (b)   economically feasible for the
                                4    affected local public body; and
                                5  (c)   determined by the state auditor
                                6    after consultation with the affected local public body; or
                                7  (4)    one million dollars ($1,000,000) or more,
                                8    the local public body shall be examined and audited as required
                                9    by Subsection A of this section.
                                10  C.   In addition to the annual audit, the state
                                11   auditor may cause the financial affairs and transactions of an
                                12   agency to be audited in whole or in part.
                                13  D.   If a local public body is required to be
                                14   examined and audited pursuant to Subsection A of this section,
                                15   the local public body shall not be eligible for the reporting
                                16   requirements provided pursuant to Paragraphs (1) through (4) of
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                                17   Subsection B of this section and shall be required to be
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                                18   examined and audited each year.
                                19  [D.] E.     Annual financial and compliance audits of
                                20   agencies under the oversight of the financial control division
                                21   of the department of finance and administration shall be
                                22   completed and submitted by an agency and an independent auditor
                                23   to the state auditor no later than sixty days after the state
                                24   auditor receives notification from the financial control
                                25   division [to the effect] that an agency's books and records are
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                                1    ready and available for audit.     The local government division
                                2    of the department of finance and administration shall inform
                                3    the state auditor of [the] any compliance or [failure to
                                4    comply] noncompliance by a local public body with the
                                5    provisions of Section 6-6-3 NMSA 1978.
                                6  [E.] F.     In order to comply with United States
                                7    department of housing and urban development requirements, the
                                8    financial affairs of a public housing authority that is
                                9    determined to be a component unit in accordance with generally
                                10   accepted accounting principles, other than a housing department
                                11   of a local government or a regional housing authority, at the
                                12   public housing authority's discretion, may be audited
                                13   separately from the audit of its local primary government
                                14   entity.   If a separate audit is made, the public housing
                                15   authority audit shall be included in the local primary
                                16   government entity audit and need not be conducted by the same
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                                17   auditor who audits the financial affairs of the local primary
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                                18   government entity.
                                19  [F.] G.     The state auditor shall notify the
                                20   legislative finance committee and the public education
                                21   department if:
                                22  (1)    a school district, charter school or
                                23   regional education cooperative has failed to submit a required
                                24   audit report within ninety days of the due date specified by
                                25   the state auditor; and
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                                1  (2)    the state auditor has investigated the
                                2    matter and attempted to negotiate with the school district,
                                3    charter school or regional education cooperative but the school
                                4    district, charter school or regional education cooperative has
                                5    not made satisfactory progress toward compliance with the Audit
                                6    Act.
                                7  [G.] H.       The state auditor shall notify the
                                8    legislative finance committee and the secretary of finance and
                                9    administration if:
                                10  (1)    [a state] an agency, state institution,
                                11   municipality or county has failed to submit a required audit
                                12   report within ninety days of the due date specified by the
                                13   state auditor; and
                                14  (2)    the state auditor has investigated the
                                15   matter and attempted to negotiate with the [state] agency,
                                16   state institution, municipality or county but the state agency,
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                                17   state institution, municipality or county has not made
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                                18   satisfactory progress toward compliance with the Audit Act."
                                19  SECTION 3.     Section 12-6-5 NMSA 1978 (being Laws 1969,
                                20   Chapter 68, Section 5, as amended) is amended to read:
                                21  "12-6-5.     REPORTS OF AUDITS.--
                                22  A.    The state auditor shall cause a complete written
                                23   report to be made of each annual or special audit and
                                24   examination made.      Each report shall set out in detail, in a
                                25   separate section, any violation of law or good accounting
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                                1    practices found by the audit or examination.     Each report of [a
                                2    state] an agency shall include a list of individual deposit
                                3    accounts and investment accounts held by each [state] agency
                                4    audited.     A copy of the report shall be sent to the agency
                                5    audited or examined and the secretary of finance and
                                6    administration; five days later, or earlier if the agency
                                7    waives the five-day period, the report shall become a public
                                8    record, at which time copies shall be sent to [(1)     the
                                9    secretary of finance and administration; and (2)] the
                                10   legislative finance committee.
                                11  B.   The state auditor shall send a copy of reports
                                12   of [state] agencies to the department of finance and
                                13   administration.
                                14  C.   Within thirty days after receipt of the report,
                                15   the agency [audited] auditor may notify the state auditor of
                                16   any errors in the report.     If the state auditor is satisfied
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                                17   from data or documents at hand, or by an additional
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                                18   investigation, that the report is erroneous, the state auditor
                                19   shall correct the report and furnish copies of the corrected
                                20   report to all parties receiving the original report."
                                21        SECTION 4.     Section 12-6-13 NMSA 1978 (being Laws 1969,
                                22   Chapter 68, Section 13) is amended to read:
                                23        "12-6-13.     AUDIT FUND--PAYMENT FOR AUDITS--EXPENSES OF
                                24   AUDITOR.--
                                25  A.   [There] The "audit fund" is created as a
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                                1    nonreverting fund in the state treasury [the "audit fund" into
                                2    which the state auditor shall deposit all].    The fund consists
                                3    of earmarked revenue, appropriations, gifts, grants, donations
                                4    and fees and costs received from agencies audited by [him] the
                                5    state auditor.    The state auditor shall administer the fund,
                                6    and money in the fund is appropriated to the state auditor for
                                7    the purposes of carrying out the Audit Act.    Disbursements from
                                8    the fund shall be made by warrant of the secretary of finance
                                9    and administration pursuant to vouchers signed by the state
                                10   auditor or the state auditor's authorized representative.
                                11  B.     Fees and costs pursuant to Subsection A of this
                                12   section shall be determined by the state auditor to recover all
                                13   fees and costs of the state auditor for performing an
                                14   engagement in accordance with professional standards.
                                15  [B.] C.    Payments for salaries and expenses of the
                                16   state auditor shall be made from the audit fund [and the fund
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                                17   shall not revert at the end of any fiscal year]."
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                                18        SECTION 5.    APPROPRIATION.--Fifty thousand dollars
                                19   ($50,000) is appropriated from the general fund to the office
                                20   of the state auditor for expenditure in fiscal year 2027 to
                                21   purchase computer software to administer statewide single
                                22   federal audits.    Any unexpended balance remaining at the end of
                                23   fiscal year 2027 shall revert to the general fund.
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