It's not every day that we find out our state government has billions of dollars, tangled in bureaucracy, accumulating in various state accounts. Recently, the Office of the State Auditor (OSA) issued the second annual Fund Balance Report that tallies unspent funds in government accounts from the most recent financial audits of state agencies. The Government Accountability Office (GAO) at OSA reviewed 398 business and enterprise, capital outlay, special revenue and other funds of 86 state agencies, and put forward best practices to get these dollars moving.

These dollars have already been allocated by the legislature or collected by agencies, and most are designated for a specific purpose to help our state; but the audit results do not inspire confidence that funds are being spent in a timely and efficient manner. This is an opportunity to move the needle to improve our communities. Activating just a small fraction of these dollars would mean thousands of new jobs, roads, schools and water systems for New Mexico.

Any standard financial operation requires certain amounts of dollars to be held in fund balances. Typically this money would offset funding gaps between expenditures and income, similar to the way a business would utilize "working capital." There is nothing inherently wrong or right about accumulating fund balances. However, a shareholder of a private company who saw too much money accumulating would have a right to ask that the extra money be put to work in the business or returned to the shareholders. Similarly, New Mexicans have a right to hold state agencies accountable for their fund balances, to keep those dollars working toward their intended purpose and to put that money back into our economy.

Below are highlights from the report:

  1. Capital Projects Funds total $1.2 billion (including bonds for building roads and schools);
  2. Executive Branch Special Revenue Funds total $501 million (including job training and Gila River project funds);
  3. Business and Enterprise Funds total $1.4 billion (including insurance and home lending funds);
  4. Revolving Loan and Grant Funds total $574 million (including water facilities, airports and help for small businesses);
  5. Stagnant Funds - accounts with balances that only changed by 1% or less - total $101 million, including over $42 million at the New Mexico Environment Department; and
  6. Water-Related Funds totaling $230 million are scattered throughout state agencies.

There are legitimate reasons why some funds are not spent, including the need to maintain reserves, insurance and bonding requirements, and inevitable delays of certain projects. However, the Fund Balance Report greatly increases transparency to identify where money is sitting unnecessarily idle. For example, in the $33 million Rural Infrastructure Fund, designed to build roads and water systems beyond our large cities, only ten thousand dollars were put to use last year.

The current system lacks meaningful, centralized reporting other than the portion of capital outlay tracked by the Legislative Finance Committee and the Department of Finance and Administration. Establishing a comprehensive project tracking office would allow the public to understand our government's basic spending. The Fund Balance Report offers best practices to help address unneeded accumulation of funds.

The state is confronting significant fiscal challenges and the recently-passed budget makes some tough reductions in government that may impact our ability to meet the needs of New Mexicans. The Fund Balance Report highlights an opportunity to lessen the impact of these cuts by cutting red tape, prioritizing projects, and focusing more on getting the money sitting in state accounts moving.

As taxpayers, citizens and New Mexicans, we can all agree that we should get the most out of every tax dollar we give to our government. In this fiscal environment we just can't afford not to.

The full report is available on the State Auditor's website at http://www.saonm.org/government_accountability_office.

Tim Keller
New Mexico State Auditor

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