New Mexico Register /
Volume XXXVI, Issue 6 / March 25, 2025
NOTICE OF PROPOSED RULEMAKING AND PUBLIC HEARING
Public
Notice: The New Mexico Office of the State Auditor
(OSA) will hold a public hearing on April 29, 2025 at
9:00 a.m. The public hearing will be
held in-person at CNM Workforce Training Center, 5600 Eagle Rock Avenue, NE, Albuquerque,
NM 87113.
Purpose: The
purpose of the public hearing is to receive public comments and to consider
adoption of proposed amendments to 2.2.2 NMAC - Requirements for Contracting
and Conducting Audits of Agencies (Audit Rule).
Statutory
Authority: Audit Act, Section 12-6-12 NMSA 1978.
Copies
of Proposed Amendments: Copies of the proposed amendments are
available on the State Auditor’s website at osa.nm.gov. A copy of the proposed amendments may also be
requested by contacting Bernadet Martinez at the OSA by telephone at (505)
469-9706 or by email at Bernadet.Martinez@osa.nm.gov.
How
to Comment on the Proposed Amendments: Public comment
regarding the proposed amendments can be made in person at the public rule
hearing, by mail sent to Bernadet Martinez, Office of the State Auditor, 2540
Camino Edward Ortiz, Suite A, Santa Fe, NM 87507, or by email sent to rulechange@osa.nm.gov.
Written comments must be received by
5:00 pm mountain time April 28, 2025. All
timely written comments will be posted on the OSA website at osa.nm.gov. Written comments may also be received at the
in-person public hearing until the hearing is closed.
Special
Accommodations: If you require special accommodations to
participate in or attend the in-person hearing, please contact Bernadet
Martinez at (505) 469-9706 or Bernadet.Martinez@osa.nm.gov at least one week
prior to the meeting or as soon as possible.
Summary
of Proposed Amendments:
2.2.2.2
Scope: The proposed amendment removes auditors of
the OSA from the scope of the Audit Rule and clarifies that the Audit Rule
covers contracting for and performing professional services related to the
examination of financial affairs and transactions of agencies and local public
bodies.
2.2.2.6
Objective: The proposed amendment clarifies that the
objective of the Audit Rule is to establish policies, procedures, rules and
requirements for contracting and conducting financial audits, special audits,
attestation engagements, performance audits and forensic accounting engagements
for the examination of the financial affairs of all governmental agencies and
local public bodies of the state of New Mexico.
2.2.2.7
Definitions: The proposed amendment makes several technical
corrections and inserts definitions for governmental accounting standards board
statements (GASBS), mountain time (MT) and the New Mexico retiree health care
authority (RHCA).
2.2.2.8
The Procurement and Audit Process:
Subsection A regarding
firm profiles is amended to delete “attest” and insert “attestation” in
accordance with the definition in Subsection A of 2.2.2.7 NMAC.
Subsection B regarding
list of approved firms is amended to delete “attest” and insert “attestation”.
Subsection C regarding
disqualified firms is amended to delete “attest” and insert “attestation” and
to make a technical correction regarding the acronym for agreed upon
procedures.
Subsection F regarding
procedures to obtain professional services from an independent public
accountant (IPA) is amended to: (i) update a citation
number in the uniform guidance procurement requirements; (ii) make style
changes so that language is more concise; and (iii) update website addresses.
Subsection G regarding
state auditor approval/rejection of unsigned contract is amended to make a
technical correction to cite the Audit Act in upper case.
Subsection H regarding
audit contract requirements is amended to update website addresses and terminology
used by the taxation and revenue department regarding business tax
identification numbers and to correct the name of the state agency that has the
contracts review bureau.
Subsection K regarding
subcontractor requirements is amended to: (i) update a
citation number in generally accepted government auditing standards (GAGAS);
(ii) update a website address; and (iii) make style changes so that language is
more concise.
Subsection M regarding
progress payments is amended to correct a misquote regarding the statutory
language of Subsection B of Section 12-6-14 NMSA 1978.
Subsection N regarding
contract amendment requirements is amended to: (i)
delete “non-attest” and insert “non-attestation” in accordance with the
definition in Subsection N of 2.2.2.7 NMAC; (ii) update a website address; and
(iii) provide that contract amendments for fee increases shall only be approved
by the state auditor if there is a significant change in the scope of the audit.
Subsection O regarding
termination of audit contract requirements is amended to: (i)
delete a citation regarding an old court order; (ii) provide that OSA shall
provide written notice of contract termination to the IPA and the agency or
local public body; and (iii) correct an internal cross reference that cited the
wrong subsection of 2.2.2.16 NMAC.
2.2.2.9
Report Due Dates:
Subsection A regarding
report due dates is amended to: (i) require that the
mountain time zone applies to due dates for reports; (ii) make technical
corrections regarding agency names, acronyms and website addresses; (iii)
delete an obsolete reference to a report due date for certain agencies; (iv)
correct errors in a cross reference to certain Subsections of 2.2.2.10 NMAC; (v)
update a citation number in the American institute of certified public
accountants (AICPA) codification of U.S. auditing standards (AU-C) and clarify
that AU-C 700.43 requires that the auditor’s report should be dated no earlier
than the date on which the auditor has obtained sufficient appropriate audit
evidence on which to base the auditor’s opinion on the financial statements,
including evidence that all statements and disclosures that the financial
statement comprise have been prepared and that management has asserted that it
has taken responsibility for those financial statements; and (vi) make style
changes so that language is more concise.
Subsection B regarding
delivery and release of the audit report is amended to require mountain time
zone for delivery of the audit report and update a citation number in AICPA
Audit and Accounting Guide (AAG GAS).
2.2.2.10
General Criteria:
Subsection A regarding
annual financial and compliance audits is amended to update several citation
numbers in AICPA Audit and Accounting Guide - Government auditing standard and
single audits (AAG SLV) and to make style changes so that language is more
concise.
Subsection B regarding
governmental auditing, accounting and financial reporting standards is amended
to make a technical correction indicating that the latest edition of 2.2.2 NMAC
is amended.
Subsection C regarding
financial statements and notes to the financial statements is amended to make a
technical correction regarding acronyms.
Subsection D regarding
requirements for preparation of financial statements is amended to make style
changes so that language is more concise.
Subsection E regarding
audit documentation requirements is amended to make
style changes so that language is more concise.
Subsection G regarding
reverting or non-reverting funds is amended to make style changes so that
language is more concise.
Subsection H regarding
referrals and risk advisories is amended to update website addresses and make
style changes so that language is more concise.
Subsection I regarding
state auditor workpaper requirement is amended to update a citation number in
GASBS.
Subsection J regarding
state compliance audit requirements is amended to correct state law references
and update statute citations and make style changes so that language is more
concise.
Subsection K regarding
federal requirements is amended to add a new provision stating that in
situations where expenditures reported in the schedule of expenditures of
federal awards (SEFA) are not the same as the expenditures reported in the
basic financial statements (due to outstanding loan balances, timing of grant
awards, expenditures incurred in a prior period, etc.), a reconciliation shall
be included in the notes to the SEFA.
Subsection L regarding
audit finding requirements is amended to update several AU-C and AAG GAS citation
numbers and make style changes so that language is more concise.
Subsection M regarding
exit conference and related confidentiality issues is amended to (i) add a new provision stating that an IPA is not precluded
from complying with communication requirements, between component auditors and
the group auditor, detailed in AU-C 600, Special Considerations - Audits of
Group Financial Statements and that state agency IPAs, constitutional
institutes of higher education IPAs and state of New Mexico component unit IPAs
are all component auditors for the New Mexico annual comprehensive financial
report (ACFR) Group Audit; and (ii) update an AU-C citation number.
Subsection P regarding
public monies is amended to make style changes so that language is more concise
and to update an AU-C citation number.
Subsection Q regarding
budgetary presentation is amended to make style changes so that language is
more concise.
Subsection S regarding
consideration of internal control and risk assessment in a financial statement
audit is amended to add provisions regarding SOC-2 and SOC-3 audit reports.
Subsection T regarding
required auditor’s reports is amended to update several citation numbers in AAG
SLV and AAG GAS.
Subsection V regarding
joint powers agreements is amended to add a governmental accounting standards
board (GASB) codification section number.
Subsection X regarding
tax increment development districts is amended to delete language that is in Chapter
5, Article 15 NMSA 1978 and instead insert a cross reference to this statutory
provision.
Subsection AA
regarding GASBS 75, accounting and financial reporting for postemployment
benefits other than pensions is amended to make style
changes so that language is more concise.
2.2.2.12
Specific Criteria:
Subsection A regarding
audits of state agencies is amended to make style changes so that language is
more concise.
Subsection B regarding
audits of housing authorities is amended to make style changes so that language
is more concise.
Subsection C regarding
audits of school districts is amended to make style changes so that language is
more concise.
2.2.2.14
Continuing Professional Education and Peer Review Requirements:
Subsection B regarding
peer review requirements is amended to delete the requirements that: (i) the IPA firm profile submission to the state auditor
include a list of the governmental audits reviewed during the peer review; and
(ii) the peer reviewer shall be familiar with this rule and that the state
auditor provides audit rule training.
Subsection C regarding
state auditor quality control reviews is amended to state that the state
auditor may perform its own quality control review of IPA audit reports and
working papers.
Subsection D regarding
SOC Audit qualifications is amended to make a technical correction changing a
word from upper case to lower case.
2.2.2.15
Special Audits and Examinations:
Subsection A regarding
fraud, waste or abuse in government reported by agencies, IPAs or members of
the public is amended to delete “non-attest” and insert “non-attestation” in
accordance with the definition in Subsection N of 2.2.2.7 NMAC.
Subsection B regarding
special audit or examination process is amended to
delete “non-attest” and insert “non-attestation” in accordance with the
definition in Subsection N of 2.2.2.7 NMAC and to make technical corrections
such as changing a word from upper case to lower case or make style changes so
that language is more concise.
Subsection C regarding
agency-initiated special audits or examinations is amended to delete
“non-attest” and insert “non-attestation” in accordance with the definition in
Subsection N of 2.2.2.7 NMAC.
2.2.2.16
Annual Procedures Required for Local Public Bodies with Annual Revenues Less
than Five Hundred Thousand Dollars ($500,000) (Tiered System):
Subsection F regarding
requirements of the IPA selected to perform the AUP is amended to update a
website address and an AU-C citation number.
Subsection H regarding
report due dates, notification letters and confidentiality is updated to require
that the mountain time zone applies to due dates and to make style changes so
that language is more concise.