State Auditor presents UNM study recommending phased move to a statewide singular audit and urges modernization of budgetary-control statutes

The State Auditor's office presented two related reports to the Legislative Finance Committee: a UNM Bureau of Business and Economic Research study on statewide audit reform and the auditor's own review of New Mexico's budgetary-control statutes.

UNM study and singular-audit recommendation: The UNM study analyzed practices in all 50 states and interviewed nine states with consolidated audit practices. It concluded that New Mexico is an outlier: the state is the only jurisdiction that currently lacks a consolidated statewide audit process for its agencies. The study recommends a phased approach: first consolidate federal single audits by program on a statewide basis (approximately 60 agencies would be in scope), then transition toward a fuller statewide consolidated financial-reporting model. The UNM team and the auditor's office said the federal-single-audit consolidation is a less difficult first step because it covers programs the federal government already treats at the program level.

Costs and next steps: The auditor's office used an FY24 appropriation of about $100,000 to commission the UNM study; the study cost roughly $90,000. The auditor's office told the committee it will seek roughly $500,000 in FY26 to develop a detailed transition plan and to scope technical work required for integration with state accounting systems. The office said that moving to a consolidated audit should improve timeliness of the annual comprehensive financial report (ACFR), reduce duplication and audit fees, and provide more consistent oversight across agencies.

Budgetary-controls review: The auditor's team also summarized a statutory review of statutes that govern allotments, warrants and DFA oversight (including sections cited in the briefing: 8-6-7; 6-5-6; 6-3-6; 6-3-8; 6-3-15; 6-4-6). The review concluded many statutory provisions are outdated, vague or inconsistent with current electronic accounting practice (SHARE) and with how allotments and receivables are treated in modern fiscal systems. The auditor's team recommended clarifying the definition of "funds at an agency's disposal", strengthening DFA's financial-control review processes for revenue forecasting, increasing allotment frequency and standardizing statutory language to make penalties and enforcement feasible.

Auditor actions and investigations: In the hearing the auditor confirmed the office had launched a special audit and investigation into Western New Mexico University matters revealed in prior work, including a questioned payment of $1,900,000. The auditor's staff said they sent information requests to the university and will accelerate the special audit timeline; the office expects agency responses under statutory timelines for investigations.

Legislative implications: Committee members asked whether statutory modernization could be pursued before replacing core financial systems; the auditor's office recommended updating statutes now so any future system replacement (SHARE or successor) would be governed by clear, modern legal language. The auditor offered staff technical support to LFC and DFA in drafting statutory updates.

Noted figures and claims: the UNM study found the state takes 8–10 months to complete the ACFR (the statutory target is six months); the UNM report cost ~ $90,000; FY24 had a $100,000 appropriation for the initial study; a FY26 request of approximately $500,000 would fund transition planning; some statute sections date to territorial-era law and should be modernized.

Follow-up: The auditor's office offered to work with LFC, DFA and other stakeholders to draft statutory modernizations and to prepare the FY26 scope of work for a transition plan for consolidated audits. The auditor also said the office will pursue the Western New Mexico special audit with an accelerated timeline and will report findings to the committee when available.