Administration rules out suit to recover accounting payments

Moss Adams was accused of shoddy auditing for 2 agencies

The administration of Gov. Susana Martinez hasn’t followed through on threats to sue the national firm of Moss Adams for what the administration alleged was shoddy accounting work performed for two government agencies.

The Department of Finance and Administration has decided against filing a lawsuit to try to recover $1.1 million paid to Moss Adams for audit and accounting services.

DFA alleged in 2014 that Moss Adams either failed to uncover the department’s long-running inability to balance its books or knew about the problem and failed to report it.

“Ultimately, our lawyers looked at the risk analysis and found that it would cost taxpayers more money to pursue a case than what we would reasonably expect to recoup from Moss Adams,” a department spokeswoman said.

The Public Education Department, also in 2014, severed its ties with Moss Adams and threatened to sue for failing to uncover possible misuse and embezzlement of public funds at the four Southwest Learning Center charter schools in Albuquerque.

A Public Education Department spokesman said no lawsuit has been filed but didn’t say why.

Steven Keene, partner in charge of the Albuquerque office of Moss Adams, couldn’t be reached Friday for comment. But in letters to the departments of Public Education and Finance and Administration, Keene said the accounting work was done in compliance with all professional standards.

The amount of work performed by Moss Adams for state government agencies has declined sharply under the Martinez administration, records show. The firm’s two largest state government clients — the retirement funds for teachers and other public employees — aren’t under the control of the governor.

The Department of Finance and Administration replaced Moss Adams as its auditing firm several years ago and was seeking repayment of all the money it paid to the firm for audit services and financial review work for fiscal years 2006-2011, saying Moss Adams materially breached its contracts with the department.

The Martinez administration discovered after it took office in 2011 that the state’s books hadn’t been balanced since at least 2006 — the year a new computer system for money management was put in place. The Department of Finance and Administration said Moss Adams failed to identify and/or report the problem.

A spokesman for Hector Balderas, then the state auditor and now attorney general, said in 2014 that the department had known about the problem since at least 2008 and was trying to explain away its mismanagement. Keene said at the time that he wasn’t surprised by the finger-pointing.

As for the dispute between the Public Education Department and Moss

Adams, the firm had conducted annual audits for several years of the Southwest Learning Center charter schools. The department alleged the financial statements of the schools for fiscal year 2013 were inaccurate, despite being audited by Moss Adams.

The FBI in 2014 seized documents from at least one of the schools, but no criminal charges have apparently been filed in connection with the investigation.

Two of the schools allegedly spent $1.1 million to lease aircraft from a company owned by the schools’ founder and head administrator, who has since resigned.