NM auditor: $7.06M of CYFD behavioral-health spending missed intent

In 2022, the New Mexico Legislature appropriated $20 million to address a shortage of children's behavioral health providers, to be administered jointly by the Health Care Authority (HCA) and the Children, Youth and Families Department (CYFD).▸ After lawmakers raised concerns the money may have been misused, the Legislative Finance Committee asked the State Auditor's Office to look into it. In an October 2025 fact-finding letter to the committee -- obtained and reviewed directly for this piece -- State Auditor Joseph Maestas reported that CYFD had spent $11.41 million of its share, and that $7.06 million of that, 62%, did not align with the appropriation's language or intent.

HCA held the full $20 million appropriation in fiscal years 2022 and 2023, spending $2.28 million of it before transferring the remaining $17.72 million to CYFD in September 2024.▸ Auditors couldn't determine whether HCA's spending aligned with the appropriation's intent because the agency didn't provide comprehensive supporting documentation. Of what auditors could trace, $1.46 million went to three vendors: Falling Colors, Inc. ($743,067), The Learning Path, LLC ($374,230), and Southwest Pediatric and Family Care, LLC ($339,100) -- the last paid in advance of services being delivered, which the auditor's letter notes is generally against state financial policy. HCA could not explain the remaining $826,529, more than a third of its reported spending.

CYFD's $7.06 million in non-aligned spending broke into three categories: $3.81 million for shelter-related services, $2.08 million for behavioral health services whose contracts lacked required provisions for long-term Medicaid sustainability, and $1.17 million for Family Resource Center services.▸ That matters because the appropriation was written to bring new behavioral health providers into the system -- not to fund services CYFD was already sourcing through its existing shelter and family-support programs. By contrast, the $3.42 million auditors found did align with intent went through a competitive Request for Applications that produced four contracts; auditors reviewed deliverables for three of the four and found them consistent with expanding access and Medicaid sustainability.

The State Auditor's Office was explicit that its October 2025 review was limited fact-finding, not a full audit, and that incomplete records from both CYFD and HCA hindered a thorough analysis -- a gap visible in the $922,670 (8%) of CYFD spending and the $826,529 (36% of HCA's reported total) that auditors simply couldn't assess.▸ The letter's own footnotes add another limit worth knowing: $6.76 million of CYFD's $11.41 million in reviewed spending, the larger share, came from fiscal year 2025 and was, in the letter's words, 'to date' unaudited by the agency's own formal financial-statement process -- meaning the 62% non-aligned figure rests partly on records that hadn't yet gone through a full audit cycle themselves.

Based on what the review did find, the Auditor's Office determined it was in the state's interest to expand its annual financial and compliance audits of both agencies to cover 100% of the procurement, invoicing, and internal controls tied to this specific appropriation.▸ The letter's conclusion goes further: auditors wrote that in the course of their review they had identified additional transactions that may not align with legislative purpose, and said they would ask the expanded audit to take a closer look at all transactions -- a signal the $7.06 million figure was not necessarily final. The letter was copied to New Mexico Attorney General Raul Torres, along with the HCA and CYFD secretaries.

The Albuquerque Journal⧉ and the Santa Fe New Mexican⧉ reported that a further, more detailed State Auditor letter to the Legislative Finance Committee, dated February 2026, found $4.2 million in CYFD spending -- described in that reporting as about 38% of what CYFD had spent from the appropriation by that point -- was deemed misused, along with $6 million left entirely unspent due to procurement delays and specific flagged expenses including roughly $2,000 for two cellphones and $5,500 for 31 contraceptive kits.

This piece could not independently locate that February letter as a public document despite a direct search of the State Auditor's released-reports pages and search portal, so it reports those figures as attributed to the newspapers' coverage rather than as independently verified.▸ Notably, the $11.41 million CYFD had spent as of the October 2025 letter this piece did verify does not cleanly reconcile with the newspapers' reported spending-to-date figure for the February letter -- a reminder that the two letters describe overlapping but not identical snapshots in time, several months apart.

CYFD spokesperson Jake Thompson said, per the Albuquerque Journal, that the agency's spending was made in good faith and consistent with what it understood to be legislative direction, and that the findings reflect a genuine difference of interpretation over allowable uses of an appropriation shared across two agencies -- not intentional misuse.▸ CYFD acknowledged its internal controls and documentation could have been clearer, and said it would establish a funding compliance review before future contracts are executed. State Rep. Meredith Dixon, D-Albuquerque, who chairs the Legislative Finance Committee's Child Welfare Sub-Committee and was among the letter's original addressees, said the findings underscore the need for continued legislative oversight of CYFD.