Current through Register Vol. 35, No. 18, September 24, 2024
The department shall evaluate the reports submitted pursuant
to 5.3.11.8 NMAC, in order to ensure accountability, detect potential problems
of finance, and to evaluate fiscal health of institutions. In its evaluation,
the department will assess potential risk factors exhibited by institutions
that have predictive value to identify problems of finance related to fiscal
solvency or fiscal control concerns of the institution. The department shall
make careful consideration of the severity, frequency, and the potential impact
to the institution's financial stability when evaluating the risk factors. The
department shall also consider whether the institution has already remedied the
risk factor(s) or the likelihood that the institution can quickly redress the
risk factor(s) to mitigate financial impact to the institution.
A. The department may determine that
potential problems of finance exist within an institution, if the institution
exhibits one or more of the following risk factors:
(1) financial ratios analysis which may
highlight liquidity or solvency issues (examples include, but are not limited
to unrestricted instruction and general fund balance as a percentage of total
expenditures or financial responsibility composite scores);
(2) weak unrestricted cash
position;
(3) negative year-end
fund balance;
(4) inability to pay
vendor invoices promptly;
(5)
delays in making pension retirement contributions;
(6) failure to make scheduled payroll
payments;
(7) non-payment of debt
principal or interest payment;
(8)
requests for advanced state funding or emergency loans;
(9) failure to complete an annual financial
audit;
(10) late submission of
annual financial audit as determined by OSA;
(11) annual financial audit with a
disclaimer, adverse, or modified audit opinion, as determined by an
IPA;
(12) repeat audit findings
classified as material weaknesses or significant deficiencies, as determined by
an IPA;
(13) a finding of fraud,
waste, or abuse by OSA in a special audit or investigation;
(14) an allegation of fraud or other crimes
that relate to financial control of the institution, made by a law enforcement
agency;
(15) designation by
accrediting agency of "show cause" or "probation" status;
(16) determinations by the accrediting agency
or IPA that indicate concerns with board fiscal governance and
control;
(17) lack of financial
systems or resources to support strong internal control (examples include, but
are not limited to inadequate staffing resources or lack of accounting
infrastructure);
(18) significant
negative variance between budget and actual spending, as determined by an
IPA;
(19) material control
weaknesses, material legal non-compliance or discussion and analysis comments
by institutional management in the annual financial audit, which could indicate
a significant effect to the financial condition of the institution in the
current and future years, as determined by an IPA;
(20) failure to obtain proper capital
projects approval required by law or regulation from the department or the
state board of finance, as determined by the department;
(21) failure to comply with any law or
regulation related to capital projects, as determined by the
department;
(22) failure to comply
with any law, regulation, or restriction related to bonds or tax levies, as
determined by the department;
(23)
failure to comply with the department's standard reporting requirements;
or
(24) any other occurrence that
indicates a lack of financial stability or lack of strong internal
control.
B. If in its
evaluation of the institution's fiscal health, the department determines that
an institution exhibits one or more of the risk factors specified in Paragraphs
(1) through (24) of Subsection A of 5.3.11.9 NMAC, the department may assign
the institution to participate in the enhanced fiscal oversight
program.
