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Balderas releases Expo/Downs audit

ALBUQUERQUE, N.M. — State Auditor Hector Balderas blasted Expo New Mexico in an extensive “risk review” of the 2012 audit he released Friday, saying the agency continues to be operationally insolvent, in violation of state and federal law and in dire need of legislative action to clarify the roles of Expo management and the governor-appointed State Fair Commission.
The report, more than two years in the making, also found a number of problems with the process Expo used in granting the Downs at Albuquerque a new 25-year lease in 2011 that included a new multimillion-dollar casino on the state fairgrounds in Albuquerque.
“Despite months, and months, and months of delays due to the Auditor’s Office applying political pressure on the independent auditor, we’re certainly pleased that he’s finally done, raising only minor technical issues that are highly disputable,” Expo spokesman Michael Henningsen said in a statement Friday.
“Unlike the no-bid, sole-source approach by the Richardson administration, this administration chose to put this lease out to a competitive bid, and the state negotiated a much-improved deal for taxpayers with the winning bidder. As a result, an anchor tenant remains in place that allows the State Fair to remain viable and in Albuquerque,” Henningsen said.
The State Auditor’s Office spent two years reviewing the audit that was submitted in December 2012 by Griego Professional Services LLP, Expos’ independent public accountant. A year later, the firm sent Balderas a letter saying the racino bid process “was in accordance with state law and procurement regulations.”
While Balderas gives qualified support of the earlier statement about the racino bid, he excoriates many of  Expo’s financial practices.
“I am alarmed by Expo’s ongoing operational insolvency,” Balderas says in the review. “The fiscal year 2012 audited financial statements show that Expo could only cover 66 cents for each dollar in current liabilities. In addition, Expo’s unrestricted net assets decreased to a deficit of approximately $3 million as of June 30, 2012. …
“Expo violated state law by spending nearly $1.6 million in excess of its legal budgetary authority in fiscal year 2012 … and failed to make the appropriate budgetary adjustment requests and transfers,” the seven-page report says.
Balderas also noted that Expo has failed to repay more than $1.8 million it owes the state Risk Management Division — a “loan” dating back to fiscal year 2009. Expo does not dispute the debt.
In addition to its budgetary troubles, Balderas said Expo could be opening itself to federal fines and other legal risks because it did not maintain proper documentation for employees.
The report also takes aim at the process Expo used in awarding a 25-year-lease to the Downs at Albuquerque, which critics say was rushed and favored the racino over the only other bidder, Laguna Development Corp., which lost its protest of the award.
The audit found that although the 30-day period to respond to the request for proposal met the letter of the law, the RFP was complex enough that Expo could have given interested parties more time to submit bids.
Additionally, the review said the three-member “evaluation committee” appointed by Gov. Susana Martinez’s administration to weigh the racino offers should have been selected by Expo management and before the due date for receipt of proposals, which was not done.
“The (independent public accountant) further states that these violations of state procurement regulation ‘may result in litigation, inappropriate selection of contractors and potential liabilities relating to old and new contract agreements,” Balderas’ report said.
Balderas recommended that Expo “swiftly implement corrective action for all findings.”
He also suggested that the Legislature “revisit whether the current statutory design for the New Mexico State Fair fully supports the growth and proper function of Expo’s enterprise operations” by conducting a comprehensive performance audit.
“Any performance audit or evaluation should also review key provisions of the racino lease and independently determine whether the terms of the lease are structured in the best interest of the state.”

The complete audit report is available here. 

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