NM State Auditor Releases 2007 Financial Audit of Office of Secretary of State

Today, State Auditor Hector Balderas released the financial audit for the Office of the Secretary of State (SOS) for the fiscal year from July 1, 2006 to June 30, 2007. The auditors were unable to express an opinion on the financial condition of the SOS due to questionable payments of $6,308,350 in federal voter education funds made to a contractor by the former Secretary of State Rebecca Vigil-Giron’s administration.

The audit was conducted by Atkinson & Co, Ltd and reviewed by the Office of the State Auditor. Click to read the complete audit report (pdf).

“The audit’s multiple findings demonstrate the severe mismanagement of federal funds that were intended to improve voter education in New Mexico,” Balderas said in a statement distributed today. “The inability of the auditors to express an opinion on the Secretary of State Office’s financial condition and the poor accountability for federal funds puts the operations of the Secretary of State at serious risk.”

The audit contains multiple findings for the former administration’s noncompliance with the Help America Vote Act (HAVA) program. The audit also includes findings from an audit conducted by the U.S. Election Assistance Commission (EAC), which was released in May 2008. The federal audit was undertaken at the request of current Secretary of State Mary Herrera and examined the HAVA funds expended by Giron’s administration from April 1, 2003 through December 31, 2006.

The audit released by Balderas contains the following key findings:

• From July 1, 2006 to December 31, 2006, the former SOS administration inappropriately used $29,735 in HAVA funds to enhance its own website;
• The prior administration over allocated expenditures to the HAVA program under Section 101 by $2,923,409; and
• During fiscal years 2005, 2006 and 2007, the SOS utilized processors for the statewide Voter Registration Election Management System without sufficient licensing under the SOS contract with a private company. The SOS breached the contract and owed the contractor $219,765 in licensing fees. The current SOS worked with the State Board of Finance to pay back $182,896 of that debt, but the State still owes $36,869.

The audit also included the following key findings from the EAC audit of HAVA funds:

--The former administration of the SOS paid the media contractor $6,271,810 over a period from August 2004 to October 2006.

• The SOS did not inform the State’s centralized procurement office of the planned purchase;
• Appeared to pay the vendor at a rate higher that the rate negotiated in the amended contract;
• Appeared to pay the vendor at a rate higher that the rate negotiated in the amended contract;
• Appeared to pay the vendor twice for producing a single video in the amount of $186,000;
• Paid the vendor in excess of the maximum amount allowed under the contract by $323,060;
• Contract amounts were paid under a Letter of Understanding that was not incorporated into the contract and which was different than the basis upon which the contract was awarded; and
• The contract arrangement which appears to be the basis for the contract appears to be prohibited by the procurement code.

“Secretary Herrera has taken corrective action by hiring a Chief Financial Officer to manage her agency’s budget and accounting practices. This very important step will help professionalize the Secretary of State’s accounting operation,” Balderas concluded. “I’m hopeful that from today forward these federal funds will be responsibly managed, but I remain extremely concerned about the financial stability of the Secretary of State’s operations.”

State Auditor Balderas said he will refer the audit to the New Mexico Attorney General’s Office, the EAC and the Federal Bureau of Investigation for review.

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