Millions of public dollars are inaccessible due to late audits. A new program aims to unlock some of the cash

SANTA FE — Tens of millions of dollars in capital outlay funding awarded to local governments and public bodies in New Mexico is on hold because of past-due audits and financial reports.

A new program launched by the State Auditor’s Office is targeting the smallest of the public entities — acequias, land grants and mutual domestic water associations — to help them catch up on their paperwork and gain access to the cash.

The money can be used to improve diversion gates, rehabilitate community centers and playgrounds, and carry out other small projects approved for capital outlay funding.

State Auditor Joseph Maestas said about $1.5 million has been freed up so far as his office hires accounting firms, county by county, to help the public entities complete their past-due financial reports.

“These are legal subdivisions of the government,” he said in an interview, “but they don’t have high-paid lobbyists walking the halls of the Capitol during the session. They’re really kind of the local heroes who are preserving our culture and heritage, especially in rural New Mexico.”

Maestas, a Democrat elected last year, said the effort started after he learned one small public body was 10 years behind on its financial reporting, with almost no hope of catching up.

The governing bodies of acequias and land grants are typically made up of volunteers, and turnover is common.

Under a 2013 executive order issued by then-Gov. Susana Martinez and kept in place by her successor, Michelle Lujan Grisham, public entities can’t access their capital outlay funding if they’re late filing annual audit reports or otherwise out of compliance with financial reporting requirements.

The order is intended to strengthen accountability and transparency for the handling of public money.

Under a previous Auditor’s Office program, Maestas said, the auditor would seek bids for a small contract to help an entity complete a financial report. But it didn’t draw much interest, he said, because of the tiny size of the contracts.

Now the Auditor’s Office — backed by $500,000 in new funding from the Legislature and governor — is grouping much of the work together, making it more lucrative for a firm to bid on it. The auditor hires a firm to help all the public bodies in a particular area, such as a county, catch up and get access to their capital outlay.

The goal is to bring every local public body into compliance by the end of June 2026.

Paula Garcia, executive director of the New Mexico Acequia Association, said the financial reporting will also make acequias eligible for other public funding, not just capital outlay.

And the reports are valuable in their own right, she said, providing an account of the public body’s finances.

“This transparency is good for our local communities,” Garcia said, “and it’s also good for the policymakers appropriating the money.”

New Mexico’s acequias — community-operated ditches that distribute water — are typically hundreds of years old. They are seeing renewed interest, Garcia said, amid the popularity of locally grown food.

Typical capital projects, she said, include water-efficiency measures, such as replacing old, leaky head gates and improving ditch lining.

For land grants — which were awarded to individuals or families by the Spanish or Mexican governments — the money is often put toward improving a senior meal site, community center, playground or other common land.

Anissa Baca, community outreach coordinator for the New Mexico Land Grant Council, said it can be “devastating when you can’t access your money” because of a paperwork problem.

“Most land grants are part of very rural communities,” she said, “and the rural community really depends on the land grant’s resources.”

The acequias and small public bodies account for just some of the frozen capital funding.

The state Department of Finance and Administration estimates about $58 million in this year’s capital outlay package this year is inaccessible until the public entity submits its most recent audit or clears up audit findings.

It amounts to about 5% to 6% of the roughly $1 billion approved by the Legislature and governor this year.