Last week, federal authorities indicted a former state corrections facilities manager thanks in part to work done by the New Mexico Office of the State Auditor.

Starting July 1, that agency — one of a handful charged with overseeing how state taxpayer money is spent— will have to learn to live with fewer dollars.

The $5.4 billion state budget Gov. Susana Martinez signed into law earlier this month shaves more than $200,000 from the budget of the State Auditor's Office for the year that starts July 1. For a state agency with a budget of $3 million this year, a cut of that size can cause serious repercussions such as fewer resources targeting waste and fraud, State Auditor Hector Balderas said last week.

"I'm six auditors down in my office now," Balderas said. "We are working on a Department of Corrections audit and we have three auditors on that. Right now, if I were to get another inquiry, I might not have staff to respond in a timely manner."

Another worry is that his agency won't be able to perform investigative audits on small rural school districts or rural towns at risk for financial problems, he said.

Balderas' concern arises out of recent history. In 2009, his agency helped unearth an alleged multimillion-dollar embezzling scheme at Jemez Mountain Public Schools, a small district in Northern New Mexico. While one of the major missions of the State Auditor's Office is contracting private firms each year to perform annual audits on hundreds of local governments, school districts and state agencies around New Mexico, on-staff auditors are prepared to do special investigative audits.

And right now, dozens of small rural school districts and rural towns around New Mexico haven't had annual audits of their finances completed in years, raising the risk for problems.

"My concern is that there are 50 agencies that have not done audits, and I was going to order (internal) auditors to do those," Balderas said. "A lot of those agencies are claiming they don't have the money to pay for independent audits."

The State Auditor's Office was a victim of the cost-saving measures adopted during this year's legislative session to balance the budget, said Rep. Luciano "Lucky" Varela, D-Santa Fe, the chairman of the Legislative Finance Committee — the Legislature's budget arm.

"It was not intended to be punitive to the State Auditor's Office," Varela said. "It was a matter of the scarcity of funds."

Varela was referring to the more than $150 million trimmed by lawmakers for the state budget year that starts July 1.

State documents show that the State Auditor's budget has shrunk significantly, down from $3,127,000 million for the state budget year that ended June 30 of last year to $2,833,000 million for the year that starts July 1.

In the past, the Legislative Finance Committee has encouraged the State Auditor's Office to reclassify administrative positions to auditing positions. In prior fiscal years, a significant portion of contractual spending was directed toward legal fees and public relations.

Audits performed by internal auditors can generate fees for the office, reducing a reliance on state taxpayer dollars, according to the committee.

There was talk during this year's session of trying to set up a new revenue stream for the State Auditor's Office, Varela said, but nothing came of it.

The Santa Fe Democrat added that the day-to-day oversight of state government is performed by the LFC and the New Mexico Department of Finance and Administration.

"The post-audit function is important," Varela said of the State Auditor's Office. But, he added, the LFC is empowered with broad powers to do investigations.

"We're overseeing government," he said. "Our powers are broad."

Contact Trip Jennings at 986-3050 or at tjennings@sfnewmexican.com.