MACIAS, GUTIERREZ & CO., P.C. CERTIFIED PUBLIC ACCOUNTANTS ESPANOLA, NEW MEXICO www.mgandc.com STATE OF NEW MEXICO ACEQUIA MADRE DEL RIO LUCERO Y DEL ARROYO SECO Independent Accountants Report on Applying Agreed-Upon Procedures (Tier 3) Year Ended December 31, 2016
Independent Accountants Report on Applying Agreed-Upon Procedures (Tier 3) Year Ended December 31, 2016
Table of Contents December 31, 2016 Page Title Page Table of Contents Official Roster Independent Accountants Report on Applying Agreed-Upon Procedures (Tier 3) i ii iii iv-vii Exhibit Project Schedule - Summary A 1 Project Schedule - Detail B 2 Schedule of Findings and Responses 3 Exit Conference 4 ii
Official Roster at December 31, 2016 Name Title Commissioners Pablo Quintana Chris Pieper Juan E. Garcia President Secretary Treasurer iii
Macias, Gutierrez & Co., P.C. Certified Public Accountants Member AICPA, NMSCPA 1302 Calle De La Merced, Suite A Espanola, New Mexico 87532 505.747.4415 Fax 505.747.4417 INDEPENDENT ACCOUNTANTS REPORT ON APPLYING AGREED-UPON PROCEDURES (TIER 3) To: Pablo Quintana, President Acequia Madre del Rio Lucero y del Arroyo Seco #13188 and Honorable Timothy M. Keller New Mexico State Auditor We have performed the procedures enumerated below, which were agreed to by the Acequia Madre del Rio Lucero y del Arroyo Seco (Acequia) and Office of the State Auditor on the Tier Verification, Capital Outlay Expenditures and Reimbursements and Other for the year ended December 31, 2016, included in the accompanying information provided to us by management of the Acequia Madre del Rio Lucero y del Arroyo Seco. The Acequia Madre del Rio Lucero y del Arroyo Seco is responsible for the Tier Verification, Capital Outlay Expenditures and Reimbursements and Other for the year ended December 31, 2016, included in the accompanying information provided to us by the management of the Acequia Madre del Rio Lucero y del Arroyo Seco. The sufficiency of these procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures and associated findings are as follows: 1. Verify the local public body s revenue calculation and tier determination documented on the form provided at www.osanm.org under Tiered System Reporting Main Page. We verified Acequia s revenue calculation and tier determination. Acequia Madre del Rio Lucero y del Arroyo Seco s cash basis revenue was less than the Tier 3 upper limit and expended at least 50% of its state capital outlay awards. The Contractor shall request and review all state-funded capital outlay awards, joint powers agreements, correspondence and other relevant documentation for the capital outlay award funds expended by the recipient that meet Tier 3 criteria. 2. The Contractor shall test all state-funded capital outlay expenditures to: Procedures a) Determine that amount recorded as disbursed agrees to adequate supporting documentation. Verify that amount, payee, date and description agree to the vendor s invoice, purchase order, contract and cancelled check, as appropriate. e-mail: jimmymac20@juno.com iv
b) Determine that disbursements were properly authorized and approved in compliance with the budget, legal requirements and established policies and procedures. c) Determine that the bid process (or request for proposal process if applicable), purchase orders, contracts and agreements were processed in accordance with the New Mexico Procurement Code (Section 13-1-28 through 13-1-99 NMSA 1978) and State Purchasing Regulations (1.4.1 NMAC). d) Determine the physical existence (by observation) of the capital asset based on expenditures to date. e) Verify that status reports were submitted to the state agency per terms of agreement and amounts in the status report agree with the general ledger and other supporting documentation. Results of Procedures Performed a) Three (3) State-Funded Capital Outlay Projects 06-1079-GF, 07-4866-GF and 07-4867-GF were active during the year ended December 31, 2016, but the State General Fund reversion dates had expired on June 30, 2010 (Project 06-1079-G) and June 30, 2011 (Projects 07-4866-GF and 07-4867-GF). However, a Capital Project Agreement existed, dated April 9, 2008, between the State of New Mexico, Interstate Stream Commission (ISC), the Acequia Madre del Rio Lucero y del Arroyo Seco and two other ditches (the Acequias ) regarding those three projects that effectively extended the expenditure of those project funds through December 31, 2015. In addition, the Acequias and the State of New Mexico were parties to the settlement of the consolidated cases of State ex rel. State Engineer et al v. Abeyta et al (No. 69cv07896) and State ex. rel. State Enigneer et al v. Arrellano et al. (No. 69cv7939) pending in the United States District Court, District of New Mexico (the Settlement ). Also, the Taos Pueblo Indian Water Rights Settlement Act, Public Law 111-291, dated December 8, 2010, Section 509(h)(1) effectively extended allowable expenditures through March 31, 2017. There is also a Settlement Agreement, dated December 12, 2012, among the United States of America, Taos Pueblo, the State of New Mexico, the Taos Valley Acequia Association and its 55 member acequias, the Town of Taos, El Prado Water and Sanitation District, and the twelve (12) Taos Area Mutual Domestic Water Consumers Associations displaying the same extended date, March 31, 2017, in Section 4.4.1. For the year ended December 31, 2016, we determined that amounts recorded as disbursed agreed to adequate supporting documentation and we verified that amounts, payees, dates and descriptions agreed to the vendor s invoices, purchase orders, contracts and cancelled check copies, as appropriate. For Project 06-1079-GF, we examined five disbursements totaling $77,206.73 paid directly from one of the Acequia s bank accounts to various vendors for appraisal services, settlement of a protest regarding ditch dues, attorney fees and a reimbursement for recording the water rights transfer. For Project 07-4866-GF, we examined two disbursements totaling $150,000.00. For Project 07-4867-GF, we examined one disbursement for $100,000.00. For these two projects, the entire $250,000.00 was disbursed into the Client Trust Account of the Acequia s attorney on March 13 and 14, 2016 and then was paid from the Client Trust Account on June 28, 2016, to the estate of the water rights owner. The supporting documentation, quarterly reports and vendor s invoices did not indicate which project(s) were associated with a disbursement except, that it was evident that Projects 07-4866- GF and 07-4867-GF were for the actual acquisition of the water rights, a total of $250,000.00. All other disbursements are shown as attributable to Project 06-1079-GF. (See Exhibit B, page 2). v
b) Except as described below, we determined that disbursements were properly authorized and approved in compliance with the budget, legal requirements and established policies and procedures. We have no basis for determining that the disbursement of funds to the Client Trust Account prior to the actual payment to the estate of the water rights owner, as described above, was in compliance with legal requirements or established policies and procedures. The contract for the water rights purchase was approved by vote of the full membership of the Acequia Madre del Rio Lucero y del Arroyo Seco prior to release of any monies to the acequia s attorneys, Cuddy & McCarthy, LLP, which occurred in March 2016, as mentioned above. On June 27, 2016, at a duly noticed meeting the three Commissioners for the Acequia Madre executed a Resolution approving completion of the purchase of the water rights and authorizing release of the monies for the purchase held by Cuddy & McCarthy, LLP. c) We determined that the bid process (or request for proposal process if applicable), purchase orders, contracts and agreements were processed in accordance with the New Mexico Procurement Code (Section 13-1-28 through 13-1-99 NMSA 1978) and State Purchasing Regulations (1.4.1 NMAC). d) Since the expenditure of Capital Outlay funds were for acquisition of water rights, we were unable to determine the physical existence (by observation) of the capital asset based on expenditures to date. e) We verified that status reports were submitted to the state agency per terms of agreement and amounts in the status report agree with accounting records and other supporting documentation. 3. Procedures If the project was funded in advance, the Contractor shall determine if the award balance (and cash balance) appropriately reflects the percentage of completion based on the project schedule and expenditures to date. Results of Procedures Performed There were three active projects for the year ended December 31, 2016. The projects were funded in advance but the majority of funds were not disbursed until various legal issues were resolved. 4. Procedures If the project is complete, the Contactor shall determine if there is unexpended balance and whether it was reverted per statute and agreement with the grantor. Results of Procedures Performed Projects 07-4866-GF and 07-4867-GF are complete. For Project 06-1079-GF, as of December 31, 2016, there is an unexpended balance of $22,793.27. (See Exhibit A, page 1). Since we are not aware of another approved Settlement Agreement extension, the unexpended balance for Project 06-1079-GF should have reverted to the state after March 31, 2017. 5. Procedures The Contractor shall determine whether cash received for the award was accounted for in a separate fund or separate bank account that is non-interest bearing if so required by the capital outlay agreement. Results of Procedures Performed Prior to the year ended December 31, 2106, separate bank accounts were required to reduce the total funds advanced below the Federal Deposit Insurance Corporation (FDIC) insured limit of $250,000.00. vi
6. Procedures The Contractor shall determine whether reimbursement requests were properly supported by costs incurred by the recipient. The Contractor shall determine whether the costs were paid by the local public body prior to the request for reimbursement. Results of Procedures Performed There were no reimbursement requests submitted for the year ended December 31, 2016 as all funds were advanced prior to 2016. 7. Other Procedures If information comes to the Contractor s attention (regardless of materiality) indicating any fraud, illegal acts, noncompliance, or any internal control deficiencies, disclose in the report as required by Section, 12-6-6 NMSA 1978. The findings must include the required content per Section 2.2.2.10 (I) (3) (C) NMAC. Results of Procedures Performed No exceptions were found as a result of applying the procedures described above (regardless of materiality) indicating any fraud, illegal acts, noncompliance or any internal control deficiencies. * * * * * This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to, and did not conduct an examination or a review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Tier Verification, Capital Outlay Expenditures and Reimbursements and Other of Acequia Madre del Rio Lucero y del Arroyo Seco for the year ended December 31, 2016, included in the accompanying information provided to us by management of Acequia Madre del Rio Lucero y del Arroyo Seco. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of Acequia Madre del Rio Lucero y del Arroyo Seco, the New Mexico State Auditor s Office and the Department of Finance and Administration, Local Government Division and the New Mexico Legislature and is not intended to be and should not be used by anyone other than the specified parties. Macias, Gutierrez & Co., CPAs, P. C. Espanola, New Mexico May 25, 2017 vii
Agreed-Upon Procedures (Tier 3) For the Year Ended December 31, 2016 Exhibit A Amount Capital Outlay Pay Amount Requested/ Amount Remaining Actual Effective Project No. Request Awarded Received Expended Balance Legislation Dates Laws of 2006, Chapter 111, Section 43, Paragraph 56, to purchase water rights fro acequias to settle water rights litigation with Through 06-1079-GF 1 $ 100,000.00 $ 100,000.00 $ 77,206.73 $ 22,793.27 the Pueblo of Taos in Taos county. 6/30/2010 Laws of 2007, Chapter 42, Section 67, Paragraph 88, to purchase water rights for acequias pursuant to the Taos water rights settlement Through 07-4866-GF 1 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ - agreement in Taos county. 6/30/2011 Laws of 2007, Chapter 42, Section 67, Paragraph 89, to purchase water rights for area acequia Through 07-4867-GF 1 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ - associations in Taos county. 6/30/2011 1
Agreed-Upon Procedures (Tier 3) For the Year Ended December 31, 2016 Amount Actual Grant Pay Request Amount Requested/ Date Invoice Check Check Amount No. Request Date Awarded Received Received Amount Number Date Expended Payee Exhibit B 06-1079-GF 1 8/2/2006 $ 100,000.00 $ 100,000.00 January 2013 No # 6/21/2013 2,000.00 Centinel Bank-To purchase Cashier's Check to extend agreement to purchase water rights No # 07/09/13 5,709.04 Centinel Bank for Cuddy & McCarthy, LLP No # 07/09/13 2,408.73 Centinel Bank for John Sjoemaker & Associates No # 9/6/2013 1,225.07 Centinel Bank-Taos News CC10687 10/8/2013 3,248.29 Centinel Bank for Cuddy & McCarthy, LLP Subtotal 2013 14,591.13 Subtotal 2014 No # 7/15/2014 7,939.07 Cash for Cuddy & McCarthy, LLP 13992 1/6/2015 12,695.54 Cuddy & McCarthy, LLP 1010 6/24/2015 4,471.52 Cuddy & McCarthy, LLP Subtotal 2015 17,167.06 $ 2,450.00 1013 1/10/2016 2,450.00 Mark Cowan and Associates 2,851.19 1014 2/17/2016 2,851.19 Mark Cowan and Associates 27,764.00 1011 3/13/2016 27,764.00 Cuddy & McCarthy, LLP - Client Trust Account for Llano Community Ditch 4,419.28 1015 3/14/2016 4,419.28 Cuddy & McCarthy, LLP 25.00 1016 7/28/2016 25.00 Palemon Martinez Subtotal 2016 $ 37,509.47 37,509.47 06-1079-GF Total $ 77,206.73 07-4866-GF 1 Unknown $ 150,000.00 $ 150,000.00 January 2013 1012 3/13/2016 $ 4,000.00 Cuddy & McCarthy, LLP - Client Trust Account No # 3/14/2016 146,000.00 Cuddy & McCarthy, LLP - Client Trust Account $ 150,000.00 $ 150,000.00 07-4867-GF 1 Unknown $ 100,000.00 $ 100,000.00 January 2013 $ 100,000.00 No # 3/14/2016 $ 100,000.00 Cuddy & McCarthy, LLP - Client Trust Account 2
Schedule of Findings and Responses Year Ended December 31, 2016 Prior Current Type Year Year of Finding Finding Finding * Number Number Current Year Findings: None Reported N/A N/A N/A Follow-up on Prior Year Findings: N/A N/A N/A An agreed-upon procedures report was not required for the year ended December 31, 2015 * Legend for Findings: A. Fraud B. Illegal Act(s) C. Internal Control Deficiency(ies) D. Noncompliance 3
Exit Conference Year Ended December 31, 2016 EXIT CONFERENCE The report contents were discussed at a telephonic exit conference held on May 31, 2017 with the following: Acequia Madre del Rio Lucero y del Arroyo Seco By telephone: Juan E. Garcia, Commissioner, Treasurer Accounting Firm James R. (Jim) Macias, CPA 4