Review finds CYFD may have misspent funds aimed at expanding behavioral health services

SANTA FE — A preliminary review into the state Children, Youth and Families Department’s spending of funds intended for behavioral health services for minors has turned up more than $7 million in possibly misaligned spending and red flags over missing documentation.

State Auditor Joseph Maestas informed top-ranking members of the Legislative Finance Committee about his office’s findings in a recent letter, after being asked by the committee this summer to review how a $20 million state appropriation was carried out.

The letter also said the State Auditor’s Office plans to expand the scope of the annual audit for CYFD and another agency — the state Health Care Authority — in order to better examine the agencies’ procurement processes and internal financial controls.

The state Auditor’s Office declined to comment on the letter, which was obtained by the Journal.

But Sen. George Muñoz, D-Gallup, the LFC’s vice chairman, said the preliminary review’s findings validated lawmakers’ previous concerns.

“If it was misspent or misappropriated, our trust level is getting lower and lower,” Muñoz said.

However, a CYFD spokesman said the beleaguered agency, which recently underwent a leadership shakeup, fully cooperated with the state Auditor’s Office and provided all requested documentation.

CYFD spokesman Jake Thompson also said the state funding in question was directed to programs that “clearly extend community-based behavioral health capacity.”

“Together, these initiatives strengthen New Mexico’s community-based behavioral health network and connect families to prevention and early intervention strategies,” Thompson said in a statement.

He also said an outside firm would launch a special audit of CYFD’s handling of the special appropriation in the next several weeks, while adding the audit would be made public upon completion.

The $20 million in question was appropriated by the Legislature in 2022 to address statewide shortages in behavioral health providers for children.

Much of the $20 million was transferred from the Health Care Authority to CYFD in September 2024, after going largely unspent, according to Maestas’ letter.

Over the last year, CYFD spent about $11.4 million of the appropriation, with roughly $3.4 million complying with the legislative intent and nearly $7.1 million not aligning with the intended spending of the appropriation, according to the state Auditor’s Office review.

An additional $922,670 in payments could not be assessed because records and contracts were not provided by CYFD upon request, the state auditor’s letter also claimed.

Of the spending flagged as not meeting legislative intent, some of the funding ended up being used on CYFD group homes or other shelter-related services.

That spending might not comply with the Legislature’s budgetary directions that the funding be directed toward “behavioral health and community child welfare services” that are eligible for federal Medicaid spending.

While state agencies have some discretion to determine how funds appropriated by the Legislature are spent, money spent in violation of legislative budgetary guidelines can lead to audit findings and possibly legal action.

Meanwhile, the scrutiny over CYFD’s past spending comes as New Mexico continues to struggle with high rates of repeat child mistreatment and drug overdose deaths.

A recent legislative report found the state’s ranking in behavioral health measures such as overall mental illness prevalence and addiction rates worsened from 2023 to 2024, despite lawmakers’ appropriating hefty amounts of funding to the issues.