HOUSE JUDICIARY COMMITTEE SUBSTITUTE FOR

HOUSE BILL 596

50th legislature - STATE OF NEW MEXICO - first session, 2011

AN ACT

RELATING TO AUDITS; AUTHORIZING THE STATE AUDITOR TO CONTRACT WITH OUTSIDE COUNSEL TO PURSUE LEGAL ACTIONS TO RECOVER PUBLIC FUNDS; CREATING THE STATE AUDITOR SUSPENSE FUND.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. Section 12-6-7 NMSA 1978 (being Laws 1969, Chapter 68, Section 7) is amended to read:

     "12-6-7. SHORTAGES IN ACCOUNTS--SURETIES.--

          A. The state auditor shall notify the appropriate surety on the official bond whenever an audit discloses a shortage in the accounts of any agency. Failure to notify the surety, however, does not release the surety from any obligation under the bond.

          B. Sureties upon official bonds of agencies are not released from liability on official bonds until the state auditor has certified to them that the accounts of the agency have been examined and found to be correct and a clearance of liability is given them.

          C. When necessary, the state auditor may institute legal proceedings against sureties upon official bonds of officers and employees. In such proceedings, the officer or employee may set up as a defense that errors have been committed by the state auditor in making charges against [him] the officer or employee, or that [he] the officer or employee has been refused proper and legal credit by the state auditor, but the burden of proof is upon the officer or employee to show such facts.

          D. The state auditor may contract with outside counsel to pursue the legal proceedings authorized by this section. Amounts recovered by or with the assistance of outside counsel shall be deposited in the state auditor suspense fund."

     SECTION 2. Section 12-6-8 NMSA 1978 (being Laws 1969, Chapter 68, Section 8) is amended to read:

     "12-6-8. REPAYMENT OF FUNDS.--

          A. If restitution has not been made in thirty days from the receipt by an agency of a report of an audit reflecting a shortage of funds for which the agency is accountable under law, [suit] an action to enforce repayment or refund to the agency, to recover damages or to seek other relief to address the shortage may be brought by the state auditor.

          B. The state auditor may contract with outside counsel to bring or assist in the enforcement action authorized by this section. Amounts recovered by or with the assistance of outside counsel shall be deposited in the state auditor suspense fund."

     SECTION 3. A new section of the Audit Act is enacted to read:

     "[NEW MATERIAL] STATE AUDITOR SUSPENSE FUND.--

          A. For the purpose of making disbursements and distributions pursuant to this section, the "state auditor suspense fund" is created in the state treasury.

          B. When pursuing a legal action by or with the assistance of outside counsel pursuant to Sections 12-6-7 and 12-6-8 NMSA 1978, all proceeds of the action received in satisfaction of the claim shall be transferred to the state auditor and deposited into the state auditor suspend fund. Attorney fees and costs of litigation paid by the state auditor shall be disbursed from the suspense fund to reimburse the state auditor. After reimbursement, the balance of the proceeds shall be distributed to the appropriate fund or funds from which the shortage occurred.

          C. Disbursements shall be made from the fund upon warrants drawn by the secretary of finance and adminstration pursuant to vouchers signed by the state auditor or the state auditor's designated representative."

     SECTION 4. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2011.

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