State officials ordered the County to hire an external fiscal agent for capital-outlay and special-appropriation grants until dozens of audit findings are resolved

Damien Willis, Organ Mountain News

LAS CRUCES - Doña Ana County will spend up to $489,000 from its reserves for outside fiscal oversight after a state special audit found systemic weaknesses in the County’s financial controls, procurement and grant administration.

County commissioners approved a contract Friday with the Southeastern New Mexico Economic Development District, or SENMEDD, during a special meeting that lasted about six minutes.

The contract complies with an order from the New Mexico Department of Finance and Administration requiring the County to use an outside fiscal agent for state capital-outlay and special-appropriation grants.

The requirement stems directly from a sweeping special audit released in May that identified 42 findings across County government.

In a letter accompanying the report, State Auditor Joseph Maestas called the findings “serious and systemic failures” and said they reflected a sustained breakdown in accountability, coordination and organizational structure.

The audit itself concluded the problems were “not isolated to a single office, department, or function,” but reflected broader weaknesses across County government.

DFA later told the County that 19 findings were material weaknesses and said the audit described an environment in which fraud, waste, abuse or misuse of public money could occur without being detected.

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State takes closer control of grant money

Under DFA’s June 22 order, Doña Ana County must use a state-approved fiscal agent before requesting money from affected capital-outlay or special-appropriation grants.

The fiscal agent will review compliance, submit notices of obligation, process payment and reimbursement requests and prepare required financial reports.

SENMEDD also will review project invoices, certify monthly reconciliations and quarterly grant reports, help safeguard grant funds and serve as a liaison between the County and state agencies.

“This item is being brought to the Commission as a stipulation with our DFA requirements,” Purchasing Manager Michael Perez told commissioners Friday.

DFA imposed additional requirements on the County, including centralized grant files, standardized documentation for expenditures, separate accounting for individual grants, tighter procurement procedures, monthly reconciliations and additional training for grant administrators.

The County also cannot receive advance funding for affected projects while the special conditions remain in effect.

Failure to comply could result in suspension or termination of grant agreements, withheld reimbursements or additional state oversight.

The requirements will remain until the Office of the State Auditor determines that all 42 findings have been remedied and the County has demonstrated sustained corrective action.

Audit found widespread financial-control problems

The special audit was performed by Jaramillo Accounting Group after disputes between County administration and the Doña Ana County Sheriff’s Office prompted a broader examination of County operations.

Auditors conducted more than 100 interviews and reviewed or tested thousands of transactions and documents. As the work progressed, the scope expanded into financial management, procurement, personnel practices, public records, grant administration and other County operations.

Among the most significant financial findings, auditors said the County’s Financial Services Department had control deficiencies involving financial reporting, procurement administration, grant oversight and required disclosures.

The report found limited technical accounting capacity, improper presentation of some funds, widespread gaps in procurement documentation, insufficient conflict-of-interest controls and repeated omissions from required financial disclosures.

Auditors also found the Finance Department lacked sufficient technical expertise to properly evaluate and implement several Governmental Accounting Standards Board requirements, creating what they described as a systemic internal-control weakness.

Procurement problems included missing or incomplete files, inconsistent documentation of required approvals and contracts that did not consistently receive documented legal review.

Auditors said those deficiencies left the County unable in some cases to demonstrate that vendors were properly selected, prices appropriately evaluated or required approvals obtained.

The audit also identified weaknesses in the County’s administration of the federal Emergency Rental Assistance Program.

Auditors found payments were made to two County employees, including one person who assisted tenants participating in the program while also receiving rental-assistance payments as a landlord. The audit did not conclude that fraud occurred, but found no documented conflict-of-interest review or independent oversight addressing the situation.

Maestas warned in May that without meaningful reform, “the likelihood of increased external oversight or intervention” would become significantly greater.

Two months later, DFA imposed the fiscal-agent requirement.

County says $489K option saves millions

Friday’s meeting centered largely on the cost of complying with that order.

Perez told commissioners County staff had explored several potential fiscal agents. One entity, he said, proposed charging 20% of each grant it administered.

With roughly 108 appropriations currently affected, Perez said that approach could have cost the County between $15 million and $20 million.

“This is a significant savings at the $489,000,” Perez said.

The SENMEDD contract instead uses fixed fees based on the size and type of each grant. The current $489,000 maximum will be paid from County reserves.

Commissioners also emphasized during the brief discussion that staff had considered multiple alternatives before recommending SENMEDD.

Commission Chairman Manny Sanchez said the County wanted the public record to reflect that staff had conducted due diligence to find the least expensive workable option, calling SENMEDD “truly the best option based off of the cost.”

Perez cautioned, however, that $489,000 may not be the final price.

“We may come back to the board as we get appropriations from the state,” he said, explaining that additional grants could require increasing the contract amount to cover additional fiscal-agent fees.

Commissioners approved the contract 4-0. Vice Chair Gloria Gameros was absent from Friday’s special meeting.

The fiscal-agent arrangement has no fixed end date. It will remain in place until state auditors determine the County has corrected the special-audit findings and demonstrated that the reforms are working.

Damien Willis is founder and editor of Organ Mountain News. If you have a personal story to share or a lead we should follow up on, reach out at OrganMountainNews@gmail.com or connect with him on X at @damienwillis.