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F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

2-7-06

HB 597

SHORT TITLE STATE AGENCY VOUCHERING THROUGH DFA SB

ANALYST Hadwiger

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

None

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

New Mexico State Fair (Fair)

SUMMARY

Synopsis of Bill

House Bill 597 would require the State Fair, New Mexico Livestock Board, and Public School

Insurance Authority to process agency vouchers/expenditures through the Department of Finance

and Administration (DFA). The bill would also establish a State Fair Fund in the state treasury

to hold all revenues generated by the Fair, except for revenue pledged to pay bonds. Money in

the fund would not revert, would be administered by the Fair and would be appropriated to the

Fair to carry out its purposes and duties. The Public School Insurance Fund would be placed in

the state treasury. All premiums and other money collected by the Public School Insurance Au-

thority would be deposited into the Public School Insurance Fund. The Livestock Board Fund

would also be placed into the state treasury. Both of these funds would be non-reverting and

comprised of revenues generated by their respective agencies.

FISCAL IMPLICATIONS

DFA did not anticipate a fiscal impact. The State Fair indicated the fiscal impact is difficult to

determine, but would include increased cost in upgrading telephonic equipment to support in-

formation transmittal to DFA, purchasing new financial software to integrate with Financial

House Bill 597 – Page

2

Control Division, and training of staff. The Fair also anticipated significant costs to deliver

documents to DFA to Santa Fe.

Continuing Appropriations language

This bill creates new funds and provides for continuing appropriations. The LFC has concerns

with including continuing appropriation language in the statutory provisions for newly created

funds, as earmarking reduces the ability of the legislature to establish spending priorities.

SIGNIFICANT ISSUES

DFA indicated that there are two significant issues related to this bill:

1. The funds and agency impacted by this bill are the only significant New Mexico state gov-

ernment entities that currently, under law, have the authority to not voucher through the Depart-

ment of Finance and Administration. This means the expenditures of these agencies are not sub-

ject to the pre-audit and post audit activities of the Department of Finance and Administration .

Consequently, independent controls so not exist over the expenditures of these entities.

2. The State Fair Commission has long held that, as an enterprise, the fair is unique, making

compliance with centralized controls too cumbersome.

The State Fair noted that the Fair has a unique task to hold an annual event of exhibition and dis-

play of a wide variety of products, services, and pursuits. The powers given to the Fair Commis-

sion are sufficiently broad, enabling the Commission to utilize a wide range of activities (year

round) to financially support this effort. Accomplishing this mission requires the ability to re-

spond to situations quickly. This includes obligations (contracts and purchase orders) and pay-

ments. Familiarization with the nature of the Fair’s business is crucial in planning and perform-

ing many of the tasks directly impacted by this proposed legislation. Examples are:

The Fair’s purchasing activity levels are cyclical, being directly impacted by the sig-

nificance of the annual event. In FY05 the Fair issued approximately 1,704 purchase

orders, with 565, (33%) occurring in the months of August and September.

Similar patterns are reflected in the payment vouchers issued. In FY05 approxi-

mately 5,903 payment vouchers were issued. Payments made during the months of

August and September comprised 19% of the total payments. Of these fairtime pay-

ments, approximately 1,000 warrants for $1.00 to $10.00 are issued as premium

awards for entries with payment due within a week of award. In order to meet this

deadline, the Fair has required one full time person preparing only premium pay-

ments. During fairtime, payments are often required immediately upon completion of

service (especially with performers). Processing these payments through Financial

Control Division would severely impact our ability to attract performers and would

remove our ability to comply with accepted established entertainment standards.

Employment levels serve as an additional reflection of the cyclical impact on Fair ac-

tivity. The Fair employs approximately 200 people on a year-round basis. (We cur-

rently have 77 FTEs/123 temporary). During the annual event, employment increases

to approximately 1,000. This means that the agency hires four times its normal staff

during fairtime. Processing employment paperwork and payroll through Central Pay-

roll would directly impact our ability to respond to employment level needs in a

timely manner.

The significant use of temporary employees is accompanied by sizeable turnover. A

House Bill 597 – Page

3

timecard system is utilized to monitor employee work hours.

The account codes used for the Fair’s accounting system have been developed to fa-

cilitate the reporting of information useful in our particular industry. We currently

provide financial reports on a monthly basis to DFA and LFC, including a standard

budget status reports and projections.

The timing of the annual event (September) would likely impact the agency’s ability

to complete its audit within sixty days of notification of readiness.

ADMINISTRATIVE IMPLICATIONS

The Fair indicated that this change of financial records processing would require significant al-

terations in the Fair’s current business procedures and practices. Due to the unusual nature of the

business operations at the Fair, warrants must sometimes be approved and paid immediately. In

certain instances terms with vendors are very short and it would not be efficient to voucher

through Financial Control Division. When working on public events emergencies occasionally

arise and supplies must be purchased immediately. The entire timetable to accomplish the agency

mission would be significantly altered, increasing staff levels, costs, and negatively impacting

entry level participation, ability to attract entertainers, and overall responsiveness.

DH/mt