New Mexico lacks clear standards for how state agencies should conduct internal audits, report finds

New Mexico currently lacks uniform requirements for how state agencies should conduct internal audits, according to a new state analysis.

A Legislative Finance Committee report, presented to state lawmakers at Tuesday morning hearing in Santa Fe, followed up on a 2022 report that found internal audits’ scope, structure and effectiveness varied greatly across state agencies. Currently, LFC officials told state makers, those issues persist and positions dedicated to oversight have decreased since 2022.

“There’s nothing in statute right now that specifies which agencies should have these types of functions,” LFC Deputy Director Rachel Mercer Garcia said during Tuesday’s hearing

She added that unlike New Mexico, many states across the nation have laws that either establish statewide inspector general offices or specify which types of state agencies should have their own internal auditors. Some mandate that state departments have an internal auditor only when their annual budget is above a certain threshold.

The report came as lawmakers this year have intensely focused on the error rate in the Supplemental Nutrition Assistance Program, which is among the highest in the nation.

Some lawmakers on the interim Legislative Finance Committee committee Tuesday said that adopting statewide internal auditing standards would be a step toward remedying high error rates.

“All we’re doing is inviting waste, fraud and abuse if we don’t have internal audits in every department,” Rep. Mark Duncan (R-Farmington) said.

The report recommends the Legislature consider creating requirements for internal audits at state agencies and departments. Specifically, the report recommends requiring that audit reports be released to the public when appropriate and allowing internal auditors to operate independently and objectively. 

Rep. Joy Garratt (D-Albuquerque) recommended the requirements specify the qualifications to become an internal auditor.

Lawmakers discussed how any legislation they craft in the upcoming 2027 session will take place under a new governor. Rep. Nathan Small (D-Las Cruces), who chairs the interim Legislative Finance Committee, said he didn’t think a one-size-fits-all approach would work, but acknowledged a need to develop stronger standards.

“We wouldn’t want in a three-person agency an inspector general, but I think the sentiment is very clear that more internal auditing is a good thing,” Small said. “I think a stronger approach as we go into a new administration makes a lot of sense.”