April 14, 2016

Gov’s office kept unused party cash, review finds

Andy Lyman

Susana Martinez during the 2016 State of the State Address.

Gov. Susana Martinez isn’t properly managing the account she used to pay for her infamous holiday pizza party last year, according to an independent audit released this month.

Susana Martinez during the 2016 State of the State Address. Photo Credit: Andy Lyman.

Andy Lyman

Susana Martinez during the 2016 State of the State Address. Photo Credit: Andy Lyman.

The finding stems from the governor’s contingency fund, which the state Legislature grants roughly $70,000 each year to for “purposes connected with obligations of the office,” according to state law. That’s been interpreted by past governors and Martinez as entertainment expenses for hosting officials and staff.

Specifically, Martinez’s office is supposed to revert any unspent money remaining in her contingency account by the end of a fiscal year to the state’s general fund, according to the audit. Instead, her office kept leftover money into that account.

Last summer, Martinez’s office rolled over $66,000 of unspent money from that account to the current fiscal year, which began in July.

The leftover money “should have been reverted to the State General Fund” and spent on “other purposes,” according to the finding from Axiom, an Albuquerque-based auditing firm commissioned by State Auditor Tim Keller to perform a yearly audit of the governor’s office.

All government entities in New Mexico are required to undergo annual audits.

But Martinez’s office argues that keeping unspent money from year to year until leaving office is the “time tested practice” of an account that’s been used by governors “for more than a hundred years.”

In a written response to the audit finding, the governor’s office defended rolling over the funds, saying that its contingency fund has never been subjected to these parts of state law before. A spokesman for Martinez didn’t return requests for comment from NM Political Report before press time.

To Axiom, the governor’s explanation still “does not cite any legal basis” for not placing the money into the state’s general fund at the end of a fiscal year.

In particular, Axiom cites a section of the state General Appropriations Act that orders all leftover money from “remaining at the end of fiscal year 2015 shall revert to the general fund by October 1, 2015” unless otherwise noted by that law, which does not mention the governor’s contingency fund.

Axiom also cites state statute that mandates all “unreserved, undesignated fund balances” by June 30 “shall revert by September 30 to the general fund.”

Keller addressed the problem in an April 5 letter to Martinez.

“While this has been the past practice, ‘it has always been this way’ is a poor substitute for an actual legal foundation,” Keller writes.

Keller also takes issue with claims from the governor’s office that he had “reversed his position” in “an unprecedented move” after not making similar findings in last year’s audit.

Keller calls the statement “incorrect” and ignorant of “the fact that an independent public accounting firm, not the Office of the State Auditor, completed the audit and issued the finding.”

“In a year when the general public was confronted with the lack of transparency of the contingency fund, it was appropriate to examine this area more closely than other firms may have in the past,” Keller writes.

This is likely a reference to Martinez’s holiday party at the Eldorado Hotel in Santa Fe last December. Martinez’s office spent $8,000 of her office contingency to fund party.

The party made headlines after audio Eldorado Hotel staff called police on Martinez that night for noise complaints and reported thrown bottles from the balcony of a hotel room.

A security guard said Martinez appeared “inebriated.”

Another point of contention to some is how this contingency fund isn’t itself subjected to state audits. State House Minority Leader Brian Egolf, D-Santa Fe, carried legislation earlier this year during the state’s budget-only session to change that.

Martinez didn’t put Egolf’s bill on the call to be heard during the short session. Egolf also introduced the proposal as a floor amendment. He withdrew the measure after a short debate after agreeing to work with Republicans this year on lumping oversight of the contingency fund with other unaudited state funds in future legislation.

The governor’s office’s written response to the audit finding notes three times that the contingency fund does not have to be audited.

Keller acknowledges this in his letter but adds that the lack of “adequate review and proper accounting” means auditors cannot determine “whether the spending is in compliance” with state law.

“Enhancing the transparency and accountability of this public fund would assure policymakers and citizens that their money is being used appropriately,” Keller writes.

He also notes that while the fund may not be subject to state audits, it is subject to state procurement code and state public records laws.

New Mexico law does, however, mandate the governor to report yearly expenses from the fund to the state Department of Finance and Administration. But Keller writes that these reports traditionally “list only highly generalized categories of spending” and lack “adequate transparency regarding the specifics of how the money is being used.”