0001|                            HOUSE BILL 209
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0002|     43RD LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 1998
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0003|                            INTRODUCED BY
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0004|                           GERALD E. WEEKS
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0005|     
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0006|                                   
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0007|     
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0008|                 FOR THE LOTTERY OVERSIGHT COMMITTEE
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0009|     
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0010|                                AN ACT
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0011|     CREATING A GAMING OVERSIGHT COMMITTEE AND PROVIDING FOR ITS
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0012|     AUTHORITY AND DUTIES; AMENDING SECTIONS 6-24-10, 6-24-27,
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0013|     6-24-28 AND 6-24-33 NMSA 1978 (BEING LAWS 1995, CHAPTER 155,
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0014|     SECTIONS 10, 27, 28 AND 33); REPEALING SECTION 6-24-9 NMSA
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0015|     1978 (BEING LAWS 1995, CHAPTER 155, SECTION 9); DECLARING AN
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0016|     EMERGENCY.
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0017|     
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0018|     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0019|          Section 1.  [<u>NEW MATERIAL</u>] LEGISLATIVE GAMING OVERSIGHT
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0020|     COMMITTEE CREATED--MEMBERSHIP--ORGANIZATION--ADVISORY
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0021|     MEMBERS--PAYMENT OF COMMITTEE MEMBERS--DISQUALIFYING
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0022|     INTERESTS--PROHIBITED ACTS.--
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0023|               A.  The "gaming oversight committee" is created as
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0024|     a joint interim legislative committee. 
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0025|               B.  The committee consists of eight members, four
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0001|     from the house of representatives and four from the senate. 
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0002|     The house members shall be appointed by the speaker of the
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0003|     house of representatives.  The senate members shall be
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0004|     appointed by the committees' committee of the senate or, if
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0005|     the senate appointments are made in the interim, by the
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0006|     president pro tempore of the senate after consultation with
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0007|     and agreement of a majority of the members of the committees'
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0008|     committee.  Members shall be appointed so that there are two
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0009|     members of the committee from each of the major political
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0010|     parties from each house.  The power of appointment shall be
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0011|     exercised by the appointing authority at the beginning of each
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0012|     interim so that committee members may be reappointed or
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0013|     replaced.  Members shall serve a term beginning with the date
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0014|     of appointment and ending on the first day of the regular
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0015|     session of the legislature following the interim for which the
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0016|     member is appointed.  No representative or senator shall serve
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0017|     as a committee member for more than four consecutive interims. 
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0018|     Vacancies on the committee shall be filled by the appointing
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0019|     authority to serve until the end of the interim in which the
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0020|     succeeding member is appointed. 
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0021|               C.  The chairman of the first committee appointed
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0022|     pursuant to this section shall be designated by the speaker of
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0023|     the house of representatives and the vice chairman of the
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0024|     first committee appointed shall be designated by the president
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0025|     pro tempore of the senate.  The positions of chairman and vice
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0001|     chairman shall thereafter rotate at the beginning of each
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0002|     interim so that a senate member is designated chairman for the
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0003|     committee serving during the second interim and a house member
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0004|     is designated a vice chairman.  
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0005|               D.  The respective appointing authorities may
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0006|     appoint members of the two bodies of the legislature as
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0007|     advisory members of the committee.  The conditions of
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0008|     appointment of members shall also apply to the appointment of
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0009|     advisory members.  Advisory members shall not vote on actions
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0010|     taken by the committee. 
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0011|               E.  A quorum consists of five voting members of the
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0012|     committee.
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0013|               F.  Members and advisory members shall be paid per
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0014|     diem and mileage for attendance at a regularly called meeting
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0015|     of the committee if a quorum of the membership is present or,
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0016|     in the absence of a quorum, if a majority of the total
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0017|     membership of the committee, including advisory members, is
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0018|     present.  
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0019|               G.  A legislator shall not be appointed to or serve
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0020|     on the committee if he has a pecuniary interest in an entity
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0021|     operating gaming activities within the state or supplying
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0022|     services or personal property to an entity operating or
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0023|     regulating gaming activities within the state.  As used in
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0024|     this subsection "pecuniary interest" means an ownership
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0025|     interest that is of a quality or quantity to affect
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0001|     significantly, directly or indirectly, the decisions or
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0002|     activities of an entity operating gaming activities within the
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0003|     state or supplying services or personal property to an entity
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0004|     operating or regulating gaming activities within the state.
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0005|          Section 2.  [<u>NEW MATERIAL</u>] GAMING OVERSIGHT COMMITTEE--
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0006|     DUTIES AND AUTHORITY--STAFFING.--
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0007|               A.  The gaming oversight committee shall exercise
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0008|     its responsibility for oversight by: 
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0009|                    (1)  continuously reviewing the operations of
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0010|     all state agencies and instrumentalities involved in the
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0011|     operation of or regulation of gaming activities within the
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0012|     state; 
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0013|                    (2)  during an interim, making advisory
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0014|     recommendations to the executive branch for appropriate
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0015|     actions by it to improve the operations and regulation of
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0016|     gaming activities within the state;
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0017|                    (3)  at the close of an interim, making
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0018|     recommendations to the legislature for legislation or other
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0019|     actions in the next following regular legislative session to
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0020|     improve the operations and regulation of gaming activities
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0021|     within the state; and
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0022|                    (4)  making and publishing an annual report of
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0023|     its activities prior to the end of each interim, copies of
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0024|     which shall be furnished to the governor, the speaker of the
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0025|     house of representatives and the chairman of the committees'
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0001|     committee of the senate with further distribution of the
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0002|     report as determined by the committee.
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0003|               B.  In exercising its responsibilities for
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0004|     oversight, the gaming oversight committee:
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0005|                    (1)  may investigate the operations and
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0006|     regulation of gaming activities within the state;
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0007|                    (2)  may require persons to appear and testify
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0008|     before it and to produce information in any form for review by
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0009|     the committee if the subject matter of the testimony or
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0010|     information sought is relevant to the committee's
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0011|     responsibilities specified in Subsection A of this section; 
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0012|                    (3)  may issue appropriate subpoenas to compel
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0013|     persons to appear and testify and to produce information as
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0014|     specified in Paragraph (2) of this subsection and, in the
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0015|     event of noncompliance with an issued subpoena, may seek
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0016|     enforcement of the subpoena in the district court of the first
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0017|     judicial district; and
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0018|                    (4)  may take action reasonably necessary to
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0019|     fulfill its responsibilities delineated in this section even
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0020|     though specific authority for a particular action is not
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0021|     expressed in this section.
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0022|               C.  Staff services for the gaming oversight
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0023|     committee shall be furnished by the legislative council
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0024|     service and funds for its expenses shall be budgeted by the
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0025|     legislative council service.  Staff services that are not
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0001|     readily available from the legislative council service may be
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0002|     provided to the committee if requested from and approved by
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0003|     the legislative council.
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0004|          Section 3.  Section 6-24-10 NMSA 1978 (being Laws 1995,
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0005|     Chapter 155, Section 10) is amended to read:
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0006|          "6-24-10.  CHIEF EXECUTIVE OFFICER--COMPENSATION--
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0007|     APPOINTMENT--DUTIES.--
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0008|               A.  The board shall appoint and set the
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0009|     compensation of a "chief executive officer", who shall serve
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0010|     at the pleasure of the board.  
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0011|               B.  The chief executive officer, who shall be an
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0012|     employee of the authority, shall:
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0013|                    (1)  manage and direct the operation of the
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0014|     lottery and all administrative and technical activities of the
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0015|     authority in accordance with the provisions of the New Mexico
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0016|     Lottery Act and pursuant to rules, policies and procedures
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0017|     adopted by the board pursuant to that act;
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0018|                    (2)  employ and supervise such personnel as
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0019|     deemed necessary;
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0020|                    (3)  with the approval of the board and
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0021|     pursuant to rules, policies and procedures adopted by the
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0022|     board, enter into contracts for materials, equipment and
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0023|     supplies to be used in the operation of the lottery, for the
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0024|     design and installation of lottery games, for consultant
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0025|     services and for promotion of the lottery;
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0001|                    (4)  contract with lottery retailers pursuant
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0002|     to the New Mexico Lottery Act and board rules;
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0003|                    (5)  promote or provide for promotion of the
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0004|     lottery and any functions related to the authority;
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0005|                    (6)  hire an executive vice president for
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0006|     security and an internal auditor and take all necessary
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0007|     measures to provide for the security and integrity of the
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0008|     lottery;
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0009|                    (7)  prepare an annual budget for the approval
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0010|     of the board;
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0011|                    (8)  provide quarterly to the board, the
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0012|     governor, the <s>[lottery]</s> <u>gaming</u> oversight committee and the
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0013|     legislative finance committee a full and complete report of
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0014|     lottery revenues and expenses for the preceding quarter; and
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0015|                    (9)  perform such other duties as are
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0016|     necessary to implement and administer the lottery.
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0017|               C.  The chief executive officer may refuse to renew
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0018|     <s>[any]</s> <u>a</u> lottery contract in accordance with the provisions
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0019|     of the New Mexico Lottery Act or the rules, policies and
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0020|     procedures of the board.
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0021|               D.  The chief executive officer or his designee may
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0022|     conduct hearings and administer oaths to persons for the
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0023|     purpose of assuring the security or integrity of lottery
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0024|     operations or to determine the qualifications of or compliance
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0025|     by lottery vendors and lottery retailers."
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0001|          Section 4.  Section 6-24-27 NMSA 1978 (being Laws 1995,
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0002|     Chapter 155, Section 27) is amended to read:
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0003|          "6-24-27.  REVENUE AND BUDGET REPORTS--RECORDS--
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0004|     INDEPENDENT AUDITS.--
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0005|               A.  The board shall:
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0006|                    (1)  submit quarterly and annual reports to
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0007|     the governor, legislative finance committee and lottery
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0008|     oversight committee disclosing the total lottery revenue,
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0009|     prizes, commissions, ticket costs, operating expenses and net
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0010|     revenues of the authority during the reporting period and, in
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0011|     the annual report, describe the organizational structure of
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0012|     the authority and summarize the functions performed by each
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0013|     organizational division within the authority;
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0014|                    (2)  maintain weekly or more frequent records
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0015|     of lottery transactions, including the distribution of lottery
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0016|     tickets to retailers, revenue received, claims for prizes,
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0017|     prizes paid, prizes forfeited and other financial transactions
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0018|     of the authority; and
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0019|                    (3)  use the state government fiscal year.
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0020|               B.  The board shall provide, for informational
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0021|     purposes, to the department of finance and administration and
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0022|     the legislative finance committee, by December 1 of each year,
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0023|     a copy of the annual proposed operating budget for the
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0024|     authority for the succeeding fiscal year.  This budget
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0025|     proposal shall also be accompanied by an estimate of the net
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0001|     revenues to be deposited in the public school capital outlay
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0002|     fund and the lottery tuition fund for the current and
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0003|     succeeding fiscal years.  
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0004|               C.  The board shall contract with an independent
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0005|     certified public accountant or firm for an annual financial
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0006|     audit of the authority.  The certified public accountant or
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0007|     firm shall have no financial interest in any lottery
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0008|     contractor.  The certified public accountant or firm shall
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0009|     present an audit report no later than March 1 for the prior
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0010|     fiscal year.  The certified public accountant or firm shall
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0011|     evaluate the internal auditing controls in effect during the
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0012|     audit period.  The cost of this financial audit shall be an
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0013|     operating expense of the authority.  The legislative finance
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0014|     committee may, at any time, order an audit of any phase of the
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0015|     operations of the authority, at the expense of the authority,
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0016|     and shall receive a copy of the annual independent financial
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0017|     audit.  A copy of any audit performed by the certified public
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0018|     accountant or ordered by the legislative finance committee
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0019|     shall be transmitted to the governor, the speaker of the house
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0020|     of representatives, the president pro tempore of the senate,
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0021|     the legislative finance committee and the <s>[lottery]</s> <u>gaming</u>
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0022|     oversight committee."
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0023|          Section 5.  Section 6-24-28 NMSA 1978 (being Laws 1995,
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0024|     Chapter 155, Section 28) is amended to read:
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0025|          "6-24-28.  INTERNAL AUDITOR--APPOINTMENT--DUTIES.--
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0001|               A.  The board, with the recommendation and
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0002|     assistance of the chief executive officer, shall employ an
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0003|     internal auditor.  The internal auditor, who shall be an
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0004|     employee of the authority, shall be qualified by training and
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0005|     experience as an auditor and management analyst and have at
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0006|     least five years of auditing experience.  The internal auditor
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0007|     shall take direction as needed from the chief executive
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0008|     officer and be accountable to the board. 
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0009|               B.  The internal auditor shall conduct and
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0010|     coordinate comprehensive audits for all aspects of the
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0011|     lottery, provide management analysis expertise and carry out
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0012|     any other duties specified by the board and by law.  The
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0013|     internal auditor shall specifically:
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0014|                    (1)  conduct, or provide for through a
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0015|     competitive bid process, an annual financial audit and
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0016|     observation audits of drawings;
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0017|                    (2)  create an annual audit plan to be
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0018|     approved by the board;
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0019|                    (3)  search for means of better efficiency and
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0020|     cost savings and waste prevention;
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0021|                    (4)  examine the policy and procedure needs of
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0022|     the lottery and determine compliance;
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0023|                    (5)  ensure that proper internal controls
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0024|     exist;
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0025|                    (6)  perform audits that meet or exceed
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0001|     governmental audit standards; and
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0002|                    (7)  submit audit reports on a quarterly basis
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0003|     to the board, the chief executive officer, the state auditor,
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0004|     the <s>[lottery]</s> <u>gaming</u> oversight committee and the
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0005|     legislative finance committee.
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0006|               C.  The internal auditor shall conduct audits as
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0007|     needed in the areas of:
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0008|                    (1)  personnel security;
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0009|                    (2)  lottery retailer security;
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0010|                    (3)  lottery contractor security;
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0011|                    (4)  security of manufacturing operations of
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0012|     lottery contractors;
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0013|                    (5)  security against lottery ticket
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0014|     counterfeiting and alteration and other means of fraudulently
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0015|     winning;
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0016|                    (6)  security of drawings among entries or
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0017|     finalists;
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0018|                    (7)  computer security;
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0019|                    (8)  data communications security;
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0020|                    (9)  database security;
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0021|                    (10)  systems security;
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0022|                    (11)  lottery premises and warehouse security;
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0023|                    (12)  security in distribution;
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0024|                    (13)  security involving validation and
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0025|     payment procedures;
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0001|                    (14)  security involving unclaimed prizes;
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0002|                    (15)  security aspects applicable to each
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0003|     particular lottery game;
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0004|                    (16)  security of drawings in games whenever
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0005|     winners are determined by drawings;
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0006|                    (17)  the completeness of security against
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0007|     locating winners in lottery games with preprinted winners by
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0008|     persons involved in their production, storage, distribution,
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0009|     administration or sales; and
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0010|                    (18)  any other aspects of security applicable
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0011|     to any particular lottery game and to the lottery and its
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0012|     operations.
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0013|               D.  Specific audit findings related to security
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0014|     invasion techniques are confidential and may be reported only
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0015|     to the chief executive officer or his designee, the board, the
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0016|     governor and the attorney general."
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0017|          Section 6.  Section 6-24-33 NMSA 1978 (being Laws 1995,
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0018|     Chapter 155, Section 33) is amended to read:
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0019|          "6-24-33.  UNLAWFUL PURCHASE OF LOTTERY TICKET--
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0020|     PENALTY.--
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0021|               A.  It is unlawful for the following persons to
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0022|     purchase a lottery ticket or to share knowingly in the lottery
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0023|     winnings of another person:
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0024|                    (1)  the chief executive officer, a board
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0025|     member <s>[a member of the lottery oversight committee]</s> or an
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0001|     employee of the authority; or
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0002|                    (2)  an owner, officer or employee of a
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0003|     lottery vendor or, in the case of a corporation, an owner of
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0004|     five percent or more of the corporate stock of a lottery
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0005|     vendor.
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0006|               B.  Notwithstanding the provisions of Subsection A
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0007|     of this section, the chief executive officer may authorize in
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0008|     writing any employee of the authority and any employee of a
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0009|     lottery contractor to purchase a lottery ticket for the
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0010|     purposes of verifying the proper operation of the lottery with
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0011|     respect to security, systems operation and lottery retailer
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0012|     contract compliance.  Any prize awarded as a result of such
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0013|     ticket purchase shall become the property of the authority and
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0014|     shall be added to the prize pools of subsequent lottery games.
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0015|               C.  Nothing in this section shall prohibit lottery
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0016|     retailers or their employees from purchasing lottery tickets
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0017|     or from being paid a prize for a winning ticket.
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0018|               D.  Certain classes of persons who, because of the
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0019|     unique nature of the supplies or services they provide for use
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0020|     directly in the operation of the lottery, may be prohibited,
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0021|     in accordance with rules adopted by the board, from
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0022|     participating in any lottery in which such supplies or
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0023|     services are used.
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0024|               E.  Any person who violates any provision of this
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0025|     section for the first time is guilty of a misdemeanor and
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0001|     shall be sentenced pursuant to the provisions of Section
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0002|     31-19-1 NMSA 1978.
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0003|               F.  Any person who violates any provision of this
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0004|     section for a second or subsequent time is guilty of a fourth
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0005|     degree felony and shall be sentenced pursuant to the
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0006|     provisions of Section 31-18-15 NMSA 1978."
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0007|          Section 7.  REPEAL.--Section 6-24-9 NMSA 1978 (being Laws
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0008|     1995, Chapter 155, Section 9) is repealed. 
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0009|          Section 8.  EMERGENCY.--It is necessary for the public
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0010|     peace, health and safety that this act take effect
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0011|     immediately.
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0012|                              
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