NM has failed to balance its checkbook since 2006

Lawmakers told NM's checkbook hasn't been balanced, cash surplus could be off by $460M

Associated Press

SANTA FE, N.M. (AP) -- State government hasn't properly balanced its checkbook for more than six years, and officials in Republican Gov. Susana Martinez's administration are warning lawmakers that New Mexico's cash surplus is $70 million to $460 million less than what has been anticipated.

Officials stress there's no immediate risk of New Mexico bouncing checks and being unable to pay its bills because of problems in the state's computerized accounting system.

However, New Mexico will have a smaller financial cushion in case of unexpected budget problems, and there's less surplus cash to spend on one-time projects such as capital improvements that the Legislature will consider during its 60-day session that started this week.

It's also likely the accounting discrepancies caused New Mexico to spend state tax dollars for some projects and programs in the past rather than tapping federal money that should have been used, according to state Controller Ricky Bejarano.

"When you don't reconcile your cash, you have no idea: 'Is money missing? Did money not get deposited?' It's high risk," Bejarano said in an interview Wednesday.

As it stands now, the administration has adjusted the state's year-end reserves to reflect a potential liability of at least $70 million for cash transactions that haven't been reconciled. That left New Mexico with reserves of about $713 million — the equivalent of 13 percent of state spending — at the end of the last budget year. Officials say it's fiscally prudent to keep balances of at least 10 percent.

However, the reserves could shrink even more if the state must write off larger amounts when a reconciliation of accounts is finally completed.

The exact amount of the cash discrepancy remains unclear, because it could take a year before historical transactions — deposits and payments — are analyzed, according to Bejarano. In just the past two years, for example, there have been about 1.4 million cash transactions.

The state has hired an outside firm to help sort out the accounting mess.

At issue is faulty implementation of a $30 million computer system in 2006, during former Gov. Bill Richardson's administration. From the outset, there were problems converting to the new centralized system from separate accounting operations used by agencies, including the treasurer's office.

But the system known as SHARE, or the Statewide Human Resources, Accounting and Management Reporting System, didn't match fund balances shown by state agencies with cash in the state's bank accounts.

"A government does two things essentially. It takes in money and it spends money. If you can't nail down your cash right from the get-go — dead on arrival," Bejarano said.

In testifying to a House committee Tuesday, Finance and Administration Secretary Tom Clifford likened the problem to an individual with a checkbook register balance that's higher than the person's bank account. He said overall cash balances shown by government agencies are higher than what's reflected in bank accounts managed by the treasurer's office.

New Mexico's finances are far more complicated than those of an individual. The state will spend about $15 billion this year. It's a mix of state and federal revenue. There are more than 100 agencies in the accounting computer system and some receive different revenue that must be tracked separately. The state sometimes pays for expenses upfront and is later reimbursed with federal dollars.

State Treasurer James Lewis told lawmakers that officials are "moving down the right path" to correct the problem and ensure there's a proper cash reconciliation going forward.

But lawmakers remain upset the accounting troubles went unresolved for so many years.

"This is a very, very serious problem," said Rep. Luciano "Lucky" Varela, a Santa Fe Democrat.

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Follow Barry Massey on Twitter at https://twitter.com/bmasseyAP .

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