1. A. To be eligible for state capital outlay appropriations or any special purpose appropriations, a grantee must meet the following criteria:

   1. (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. (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.

   3. (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.

      1. (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.
      2. (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.
   4. (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.

   5. (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.

      1. (a) Grantees must include specific deadlines and responsible parties in corrective action plans to ensure accountability and progress tracking.
      2. (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.

   6. (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:

      1. (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
      2. (b) another entity with adequate accounting methods and procedures is able and willing to act as fiscal agent for the grant;
   7. (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.

2. B. To be eligible for state capital outlay appropriations or any special purpose appropriations, a Tribal government must meet the following criteria:

   1. (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. (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:

      1. (a) the grantee must remedy the inadequacies in its accounting methods and procedures to the satisfaction of the home agency making the grant;
      2. (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
      3. (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]