Lawmakers grill NMFA, investigators

ALBUQUERQUE (KRQE) - There are still plenty of unanswered questions in the continuing investigation at the New Mexico Finance Authority, but it's not just detectives and auditors doing the asking

On Monday the oversight committee in charge of monitoring the major public lender had plenty of questions of their own for NMFA staff and investigators looking into the mess.

The NMFA submitted late audits the last three years, including a forged 2011 audit former controller Greg Campbell is charged with creating. That was enough for the State Auditor's Office to put the NMFA on its "at risk" list earlier this year.

But Rep. Jane Powdrell-Culbert (R - Corrales) said state auditor Hector Balderas didn't do enough.

"We should have been notified that it was late," Powdrell-Culbert said.

Balderas shot back, saying that it was the oversight committee that didn't do enough in this case.

"The fact of the matter is we notified the Legislative Finance Committee twice both in January and March and we also notified [the oversight] committee in May so there is substantial notification," Balderas said. "The key though is that oversight agencies take action."

The scandal started when the fake audit was uncovered this summer. The State Securities Division arrested Campbell and Chief Operations Officer John Duff , charging that both men conspired to misreport the NMFA's financial state.

According to a criminal complaint, instead of reporting money that was given back to the general fund during a state budget crunch as reduced revenue, it was reported as a grant given out. That made the NMFA's revenues look larger than they were.

The NMFA board placed Duff on unpaid leave and CEO Rick May on paid leave the day after the arrests.

So far no money has been reported missing. The NMFA has hired an outside accounting firm to conduct a forensic audit and determine what led to the forged audit, who was responsible and whether any funds were misappropriated or stolen.

That audit, including money paid out to the State Auditor's Office, will cost $1.25 million. Early results are expected back in late September or October.

At this morning's oversight committee meeting, several lawmakers wondered what effect the fake audit would have on the NMFA's bond rating.

"Given the overall financial strength of this program, I think there's a very good chance and, based on my conversations with the ratings agencies, even a likelihood that we'll be able to maintain our ratings," said Michael Zavelle, the NMFA's chief financial strategist.

Until there's an accurate audit in place, the NMFA can't sell bonds, the primary way it funds loans it makes to local governments and school districts around the state. It's still making some loans less than $5 million, but bigger projects either have to wait or find funding elsewhere.