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SENATE MEMORIAL 8
57
TH LEGISLATURE
- STATE OF NEW MEXICO -
FIRST SESSION
, 2025
INTRODUCED BY
Pete Campos
A MEMORIAL
REQUESTING THE STATE AUDITOR TO CONVENE A WORK GROUP TO STUDY
FINANCIAL OVERSIGHT AND CAUSES OF DEFICIENCY APPROPRIATION
REQUESTS AND MAKE RECOMMENDATIONS TO IMPLEMENT RECOMMENDATIONS
OF THE STATE AUDITOR'S OFFICE RELATED TO DEFICIENCY
APPROPRIATION REQUESTS.
WHEREAS, during the 2024 regular session of the
legislature of the state of New Mexico, the state auditor was
asked to review state agency deficiency appropriation requests
due to the increasing frequency and magnitude of those
requests, which creates opportunity costs for the use of
appropriated funds; and
WHEREAS, following an informal work group meeting with
legislative finance committee staff, the government
accountability office of the office of the state auditor
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reviewed financial audits and collaborated with staff from the
legislative finance committee and the department of finance and
administration to gather additional information related to
deficiency appropriation requests; and
WHEREAS, a transparency report by the state auditor's
government accountability office showed that state agency
deficiency appropriation requests increased by one hundred
thirty-seven million five hundred thousand dollars
($137,500,000) from 2014 to 2024, signaling a troubling trend
in state agency financial management practices, including some
that may require budgetary enforcement measures to prevent
recurrence; and
WHEREAS, the report also revealed that in some cases state
agencies failed to provide justifications to the department of
finance and administration for deficiency appropriation
requests and some agencies bypassed the department's formal
deficiency request process entirely; and
WHEREAS, it was also noted that justifications offered by
departments for deficiency appropriation requests were often
linked to causes including over-expenditures, improper
reversions, long-standing hidden deficits, failure to adhere to
budget authority and unpaid expenditures from prior years; and
WHEREAS, the increasing number of deficiency appropriation
requests is a concern for all state financial oversight
entities, including the state auditor, as it may signal
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noncompliance with laws and regulations; and
WHEREAS, current statutes and rules do not adequately
address modern fiscal concerns and there is a lack of clarity
with respect to authority and responsibility over different
aspects of budget management; and
WHEREAS, several statutes that address warrants and
overpayments; budgetary controls and penalties; and other
budgetary controls conflict with other statutes, some of which
date back to when New Mexico was not yet a state; and
WHEREAS, most of these statutes became law before the
state adopted the current SHARE financial management system,
and workaround methods had to be developed to allow financial
processes and payments to take place within that system; and
WHEREAS, key recommendations from the office of the state
auditor's government accountability office's transparency
reports include modernizing, clarifying and planning for the
future of practices and budgetary framework statutes and
include:
A. to improve transparency it is recommended that:
(1) the department of finance and
administration and the legislative finance committee
collaborate to improve the transparency of deficiency
appropriation requests during budget hearings;
(2) in the absence of direct links between
financial statements and deficiency appropriation requests,
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state agencies and oversight entities work together to provide
clear explanations for the public on the reasons for
shortfalls;
(3) the department of finance and
administration and the legislative finance committee require
state agencies to provide more written details and supporting
documents for deficiency appropriation requests in their annual
budget submissions; and
(4) if state agencies fail to submit the
required information for review of deficiency requests, the
legislature consider withholding funding for those requests;
B. the addition of more audit procedures, which
would provide for the office of the state auditor to require
independent public accountants to conduct additional state law
compliance procedures with respect to entities that submit
deficiency appropriation requests, to allow public review of
how the appropriations affect financial statements;
C. to enhance review processes it is recommended
that:
(1) the legislature and governor consider
whether to continue funding deficiency appropriation requests;
(2) if deficiency appropriation requests are
funded, a more formal process be used, which would include
increased rigor, transparency, accountability and performance
metrics related to budget and appropriation adherence; and
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(3) the department of finance and
administration and state agencies prepare for the possibility
that deficiency appropriation requests will not be granted by
the legislature and develop strategies to address deficit
balances when requests are not granted;
D. required review of penalties for budget
violations, including:
(1) the legislature's, department of finance
and administration's and independent accounting firms' review
of Chapter 6, Article 10 NMSA 1978, related to expenditure of
funds and penalties for violations of budgetary controls;
(2) the legislature's and the department of
finance and administration's review of whether additional
measures are needed to enforce budgetary discipline, given the
fact that current law only considers penalties for violations
such as the failure to close the year with a positive fund
balance; and
(3) consideration of whether the state should
update the SHARE financial management system and conduct a
thorough review and update of all financial-related statutes
before updating the system; and
E. a required review of laws related to budget
adjustments and oversight to improve state budgetary controls
and to strengthen the effectiveness of the state's budgeting
process;
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NOW, THEREFORE, BE IT RESOLVED BY THE SENATE OF THE STATE
OF NEW MEXICO that in recognition of the need for more
transparent, accountable and legally compliant fiscal
management processes and budgetary oversight of operations that
lead to deficiency appropriations, the senate support the
implementation of the office of the state auditor's
recommendations and support a comprehensive study to improve
financial oversight and address the root causes of deficiency
requests; and
BE IT FURTHER RESOLVED that the office of the state
auditor be encouraged to convene a work group, including
representatives from the legislative finance committee, the
department of finance and administration, the office of the
state treasurer and other members of the executive branch, to
draft legislation for the legislative finance committee's
endorsement; and
BE IT FURTHER RESOLVED that legislation proposed by the
work group should be developed with consideration of the
proposed reforms recommended by the state auditor and focus on
increased transparency in budget hearings, the implementation
of stronger compliance and enforcement mechanisms and inclusion
of a more centralized department of finance and administration
oversight function; and
BE IT FURTHER RESOLVED that copies of this memorial be
transmitted to the governor, the secretary of finance and
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administration, the director of the legislative finance
committee and the office of the state auditor.
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