No money was stolen, but agency was a mess, state auditor says
The bizarre story of a fraudulent audit at the New Mexico Finance Authority ended Friday with another strange twist.
Nobody in the agency embezzled any money, but the investigation into what went wrong cost the NMFA more than $1.1 million.
A single employee, former Controller Greg Campbell, concocted the fake audit. But his supervisors and the NMFA board were negligent because they entrusted so much power in him and did not perform proper oversight, State Auditor Hector Balderas said in a 170-page special audit. It was prepared with the help of the accounting firm of PricewaterhouseCoopers.
“Our investigation found that NMFA’s executive management, audit committee and board committed numerous violations of certain laws, regulations, policies and standards pertaining to the external audit process,” Balderas, right, stated in his report.
“These violations constituted a massive failure of the management and governance of the NMFA” by those responsible for overseeing its 2011 audit.
Balderas said Campbell, viewed as a competent and diligent employee by his bosses, was delegated “almost complete autonomy” to manage the agency’s external audit.
In a way, Balderas said in an interview, the NMFA was lucky that the only damage done was a phony audit that smeared the agency’s reputation. So weak were the NMFA’s operational standards that theft or fraud could have occurred, he said.
Along with Campbell, Balderas said many others in the Finance Authority were derelict in their duties.
“The likelihood of Mr. Campbell perpetrating the fraudulent audit report would have decreased significantly had members of NMFA’s executive management, audit committee and board complied with their fiduciary and oversight obligations,” Balderas said.
Another failing, he said, was that the NMFA’s independent public accountant, Clifton Gunderson, failed to raise concerns about missed deadlines with the audit committee or the state auditor’s staff.
Campbell last month pleaded guilty to faking the audit and received probation.
The NMFA board fired Rick May as chief operating officer of the agency because of the phony audit. It also severed ties with chief operating officer John Duff, who was arrested but never charged with any crime in the audit fiasco.
The Finance Authority is a agency that operates something like a public bank, loaning money to governments for roads, schools and other public projects.
Greg Campbell / Photo by Eddie Moore
It board chairwoman, Nann Winter, said the findings of the Balderas investigation and two other inquiries will provide “a blueprint for procedural and oversight restructuring at NMFA.”
“Lax supervision and a casual attitude toward the audit statutes and rules are a thing of the past,” Winter said.
She said an internal auditor position has been established and probably would be filled by early 2013.
Winter also said the NMFA accounting staff, management and board were now actively involved in the NMFA’s financial audit.
State Sen. Timothy Keller, D-Albuquerque, has said he would introduce a bill to add finance professionals to the NMFA board. Currently, four cabinet secretaries to the governor are on the board.
For his part, Balderas said he had not yet taken a stand on the structure of the board, though he might when the 60-day legislative session begins in January.
Balderas also said greater state auditing resources may be needed. He said his office is smaller than many agencies it audits. The auditor operates on a $2.2 million budget, but state agencies and resources that require audits exceed $60 billion, Balderas said.