New Mexico
Register / Volume XXXVII, Issue 14 / July 28, 2026
TITLE 2 PUBLIC
FINANCE
CHAPTER 91 GRANTS
PART 1 GRANT
MANAGEMENT AND OVERSIGHT REQUIREMENTS
2.91.1.1 ISSUING AGENCY: Department of finance and administration.
[2.91.1.1
NMAC - N, 7/28/2026]
2.91.1.2 SCOPE: This
rule applies to all state agencies involved in the issuance of capital outlay
appropriations or special purpose appropriations authorized by the legislature.
[2.91.1.2 NMAC - N, 7/28/2026]
2.91.1.3 STATUTORY
AUTHORITY: This rule is promulgated pursuant to the “Public
Finance Accountability Act”, Section 6-3b-1
NMSA 1978.
[2.91.1.3 NMAC - N, 7/28/2026]
2.91.1.4 DURATION: Permanent.
[2.91.1.4 NMAC - N, 7/28/2026]
2.91.1.5 EFFECTIVE
DATE: July 28, 2026, unless a later date is cited at
the end of a section or paragraph.
[2.91.1.5
NMAC - N, 7/28/2026]
2.91.1.6 OBJECTIVE: Establish
uniform funding criteria and implement grant management and oversight
requirements for state agencies responsible for disbursing capital outlay
appropriations or other special purpose appropriations, thereby ensuring
adherence to applicable laws and protecting public funds.
[2.91.1.6 NMAC - N, 7/28/2026]
A. “Adequate accounting methods and procedures” means
that the design and operation of the grantee's internal controls allow
management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, on a timely basis:
(1) noncompliance with applicable laws,
policies, and procedures related to the expenditure of grant funds, including,
but not limited to, expending grant funds after expiration of the expenditure
period;
(2) misstatements regarding grant funds,
including, but not limited to, the failure to timely and accurately record and
report grant revenue and expenditures;
(3) the misappropriation of grant funds or
assets acquired by grant funds, including, but not limited to, theft or
embezzlement of funds or assets acquired with grant funds and the use of grant
funds or assets acquired for other than allowable purposes.
B. “Annual audit” refers to the yearly review or
examination of a grantee's financial affairs conducted by an independent
auditor as mandated by the Audit Act.
C. “Corrective action plan” refers to a plan prepared
by a grantee that addresses each annual audit finding in a comprehensive and
detailed manner, with specific implementation steps and timelines for
resolution. Corrective action plans must comply with 2.2.2.10 NMAC and GAGAS
6.57 and 6.58.
D. “Department” refers to the department of finance
and administration.
E. “Federal single audit” refers to the mandatory,
organization-wide audit required under 2 C.F.R. Part 200 for entities that
spend $1,000,000 or more in federal funds within a fiscal year. Federal single audit includes all forms and
federal single audit documentation required under the Federal Single Audit Act
of 1984, as amended, and 2 CFR part 200, subpart F.
F. “Fiscal Agent” refers to an organization with adequate
accounting methods and procedures approved by a grantee and the home agency to
manage the financial and administrative matters of the grantee regarding a grant.
G. “Force majeure event” refers to an unusual,
extraordinary, sudden, unexpected, unforeseeable, unavoidable, or
uncontrollable event that makes performance of the requirements of this rule
impossible or impracticable, including but not limited to natural disasters,
war, strikes, or pandemics.
H. “Grantee” refers to an entity that receives a
capital outlay appropriation or another special purpose appropriation from a
state agency.
I. “Home agency” means the agency to which capital
outlay or special appropriation is appropriated.
J. “Independent auditor” means a certified public
accountant or chartered accountant approved by the state auditor to examine a
grantee's financial records and transactions, impartially and objectively
determining compliance with generally accepted accounting principles and state
laws and rules.
K. “Material weakness” means a deficiency, or a
combination of deficiencies, in internal control, such that there is a
reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented or detected and corrected on a timely basis.
L. “Significant deficiency” means a deficiency, or a
combination of deficiencies, in internal control that is less severe than a
material weakness yet is important enough to merit attention by those charged
with governance.
M. “Special conditions” refers to additional
requirements or terms beyond the standard conditions outlined in the
appropriation or grant agreement that mitigate risks identified in an annual
audit, risk assessment, or project readiness review. This includes, but is not limited to, specific
reporting formats, timelines, or frequency; restrictions on allowable costs or
specific accounting practices; specific project activities, timelines, or
milestones; rules about key personnel; change-in-personnel notifications; or
applicable rates.
N. “Special purpose appropriation” refers to any
nonrecurring, one-time appropriation of state funds authorized for a specific
purpose. This type of appropriation is
used to fund projects that are not part of a state agency's ongoing, annual
operating budget.
O. “State agency” refers to any department,
institution, board, bureau, commission, district, or committee of state
government.
P. “Tribal government” means a federally recognized indian nation, tribe, or pueblo located wholly or partially
in new mexico or any of its governmental entities or subdivisions.
[2.91.1.7
NMAC - N, 7/28/2026]
A. To be eligible for state capital outlay appropriations or
any special purpose appropriations, a grantee must meet the following criteria:
(1) A grantee must have completed an
annual audit for one of the past two fiscal years, and the most recently
completed annual audit must be a public record pursuant to the audit act.
(2) A grantee must adhere to financial
reporting requirements and secure approval for the current fiscal year's budget
from any applicable governing body or oversight agency.
(a) For grantees that are local public bodies as defined by
Section 6-6-1, NMSA 1978, the applicable budgetary oversight agency is the
local government division of the department.
(b) For grantees that are subject to the
public school finance act, Section 22-8-11. NMSA 1978, the applicable budgetary
oversight agency is the public education department.
(c) For grantees that are subject to the
authority granted under Paragraph (2) of Subsection A of Section 21-1-26 NMSA
1978, the applicable budgetary oversight agency is the higher education
department.
(3) Grantees exempt from annual audit
requirements must demonstrate to the state agency making the award sufficient
accounting methods and procedures that ensure a strong system of fiscal
controls and proper tracking of fund payments, disbursements, and balances,
adhering to the specific guidelines outlined in the state’s model accounting practices,
as amended.
(4) If a grantee’s most recent annual
audit documents material weaknesses or significant deficiencies, findings that
raise concerns about the grantee’s ability to expend grant funds in accordance
with applicable law and to account for and safeguard grant funds and assets
acquired with grant funds, or if the grantee’s accounting methods and
procedures fail to meet the requirements of Paragraph (3) above, the grantee
must prepare a corrective action plan to address these issues.
(a) Grantees must include specific
deadlines and responsible parties in corrective action plans to ensure
accountability and progress tracking.
(b) Grantees must report monthly on the
progress of the corrective action plan to their home agency until the material
weaknesses, significant deficiencies, or other relevant findings are remedied
as evidenced by certification from the state auditor per 2.91.1.9 NMAC below.
(5) In the case of a grantee who fails to
meet any of the requirements of Paragraphs (1) - (4) above, before becoming
eligible to receive capital outlay or special appropriation funding, the home
agency issuing the funding must make one of the following determinations:
(a) the home agency can impose and has the
resources to implement special grant conditions that will adequately address
any relevant deficiencies in the grantee's accounting methods and procedures;
or
(b) another entity with adequate accounting
methods and procedures is able and willing to act as fiscal agent for the grant;
(c) where the home agency determines that another entity with
adequate accounting methods and procedures is able and willing to act as fiscal
agency for the grant, the home agency must impose special conditions that
ensure the grantee implements a corrective action plan to remedy any deficiency
in compliance with Paragraphs (1) - (4), promptly.
B. To be eligible for state capital outlay appropriations or
any special purpose appropriations, a Tribal government must meet the following
criteria:
(1) A grantee must have, for the most
recently concluded fiscal year, timely submitted to the federal government a federal
single audit report. A federal single audit
report is considered timely if submitted by any extended due date granted by
the grantee's federal cognizant agency.
(2) If a grantee's most recent federal single
audit raises concerns about the grantee's ability to expend grant funds in
accordance with applicable law and account for and safeguard grant funds and
assets acquired with grant funds:
(a) the grantee must remedy the
inadequacies in its accounting methods and procedures to the satisfaction of
the home agency making the grant;
(b) the home agency making the grant must determine
it can impose and has the resources to implement special grant conditions that
adequately address the inadequacies in the grantee's accounting methods and procedures;
or
(c) the home agency making the grant must determine
that another entity with adequate accounting methods and procedures is able and
willing to act as the fiscal agent for the grant.
[2.91.1.8
NMAC - N, 7/28/2026]
2.91.1.9 CLEARANCE OF SPECIAL CONDITIONS
OR FISCAL AGENT REQUIREMENTS:
When
a grantee is required under 2.91.1.8 NMAC to submit a corrective action plan or
to comply with specific conditions, or when a fiscal agent is required for the
disbursement of any capital outlay or special appropriations, the home agency
disbursing the capital outlay or special appropriation shall enforce these
conditions or the fiscal agent requirement unless and until:
A. All material weaknesses, significant
deficiencies, or other relevant findings are addressed, as evidenced by
certification from the state auditor in accordance with Section 12-6-5, NMSA
1978; or
B. the state auditor determines, based
on corrective actions taken by the grantee, that the grantee has adequate
accounting methods and procedures to track and safeguard grant funds and assets
acquired with the grant.
[2.91.1.9
NMAC - N, 7/28/2026]
2.91.1.10
GRANT MANAGEMENT AND
OVERSIGHT:
A. Home agencies must conduct a risk
assessment on project readiness and ensure grantees are prepared to spend at
least eighty-five percent of their allocated capital outlay funds within three
years of the grant award.
B. Home agencies must adhere to the state’s model accounting practices
requirements for grant management and oversight (FIN 9.2), as amended, and use
an approved capital outlay or special appropriation grant agreement template
developed by the department.
C. Home agencies must analyze and review compliance and
expenditure reports submitted by grantees for capital outlay or special
appropriations at least quarterly, and they must also be able to create fund
drawdown projections for each project.
D. Home agencies, in collaboration with the state auditor’s office,
must develop policies and procedures for performing field audits of capital
outlay or special appropriation projects using a statistical or stratified
approach.
E. Grantees must undergo performance reviews to assess the
implementation of corrective action plans for material weaknesses or
significant deficiencies. The home agency
must monitor compliance and take appropriate steps to address any
non-compliance throughout the grant period.
F. Home agencies must ensure that the sales, leases, and
licenses of capital assets acquired with appropriations are approved in
accordance with applicable law.
G. Home agencies must continuously monitor a grantee’s
compliance with the applicable uniform funding criteria and take appropriate
action to correct any noncompliance.
[2.91.1.10
NMAC - N, 7/28/2026]
2.91.1.11 FORCE MAJEURE WAIVER REQUESTS:
A. Grantees may request a waiver of
strict compliance with the Public Finance Accountability Act due to a force
majeure event.
B. The grantee must submit a detailed written waiver request
to the home agency that administers the capital outlay appropriation or special
purpose appropriation, including the following information:
(1) the specific force majeure
circumstances that prevent strict compliance;
(2) the impact of the force majeure event
on strict compliance;
(3) the alternative procedures the grantee
proposes to prevent waste, fraud, and abuse of the appropriation; and
(4) a comprehensive timeline outlining the
essential steps and completion timing for the grantee to achieve compliance
with the Public Finance and Accountability Act.
C. Upon receiving a waiver request, home agencies must review
the request, determine its reasonableness, and evaluate any alternative
procedures that can be implemented to mitigate potential waste, fraud, or abuse
resulting from the waiver of strict adherence to the Public Finance
Accountability Act.
D. Home agencies must submit waiver requests for legal review
to the department's general counsel’s office at dfalegal@dfa.nm.gov.
E. At their sole discretion, the secretary of the department,
in consultation with the state auditor, may grant a temporary waiver of any or
all requirements of this rule, impose specific conditions for the award of a
grant agreement, or establish any additional conditions or procedures necessary
to prevent waste, fraud, or abuse of public funds.
F. The department will give all state agencies managing
appropriations for the grantee a written determination that outlines any
granted waiver, along with any alternative conditions or requirements related
to that waiver.
[2.91.1.11
NMAC - N, 7/28/2026]
2.91.1.12 REQUESTS FOR FUNDING TO DEVELOP AND
IMPLEMENT CORRECTIVE ACTION PLANS:
A. Grantees may request funding from the
state auditor to develop, implement, and audit compliance with corrective
action plans that address material weaknesses, significant deficiencies, or
other relevant findings.
B. The state auditor, at his discretion
and depending on available funding, will review and approve requests based on
the grantee’s demonstrated need and the potential impact on protecting public
funds.
[2.91.1.12 NMAC - N, 7/28/2026]
HISTORY OF 2.91.1 NMAC:
[RESERVED]