DALLAS — The New Mexico Finance Authority met in an emergency session Monday after learning that a phony audit had been used in statements to bond investors.

The discovery last week prompted the NMFA to call off a $40.4 million issue of senior-lien revolving fund revenue bonds that had been scheduled for July 26.

The accounting firm KPMG was hired complete the audit and conduct a full forensic investigation, officials said. The authority hired the law firm of Steptoe & Johnson to investigate the matter and make recommendations.

“In addition to communicating with ratings agencies, investors and public officials, we have, in accordance with New Mexico law, notified the appropriate law enforcement authorities,” said NMFA chief executive officer Richard E. May in a prepared statement. “This matter is deeply concerning but it will have no effect on NMFA’s ability to meet its financial obligations.”

The false audit information attributed to Clifton Gunderson LLP was used in a $24.3 million NMFA issue on March 22.

When it learned that the questioned audit had been withdrawn, Moody’s Investors Service placed NMFA’s Aa1 senior lien and Aa2 subordinate lien ratings under review for downgrade, affecting $1.26 billion in outstanding total debt.

“The recent discovery that the audit was not actually audited but was presented as such on the authority’s website and in the most recent bond offering document indicates NMFA has weak internal controls over financial reporting which may not be consistent with the current ratings,” wrote Moody’s analyst Kristin Button. “Moody’s will continue to monitor progress of newly presented 2011 financial statements as well as efforts by NFMA to establish more stringent internal controls.”

NMFA blamed the false information on a former controller who left his position in early June before the issue was discovered by the State Auditor’s Office. The former official had misrepresented to senior management the status of the audit and provided financial statements, according to the NMFA.

In addition to issuing bonds for the state, NMFA makes billions of dollars in loans to governmental entities financing capital equipment and infrastructure projects. In fiscal year 2010, NMFA’s total operating expenses was $127.8 million and its total liabilities and net assets were $1.8 billion.

In another fiscal donnybrook, the state of New Mexico announced that human error caused more than 7,700 employees to either miss a June paycheck or get an incorrect amount of pay. The state also said payroll employees weren’t properly trained and staffing levels weren’t appropriate to effectively get the state payroll out.

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