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January 20, 2013

Patrick Stewart, CPA 2540 Camino Edward Ortiz, Suite A Santa Fe, NM 87507 Re: EXPO Procedures

Dear Mr. Stewart: Thank you for all your efforts and time dedicated to the audits for State Agencies. I am writing in response to our conversation on January 16, 2013 related to the EXPO NM June 30, 2012 audit. The Office of the State Auditor Requested that we provide a letter indicating procedures performed regarding the State of NM Auditors letter dated December 5, 2012 regarding issues at EXPO NM. Below are the issues indicated and the procedures and conclusion to those procedures:
1) Please evaluate whether Expo New Mexico had enough evidence to support that the Downs was a responsible bidder (as defined by Sections 13-1-82 and required by 13-1-108 NMSA 1978) with adequate financial resources or a good service reputation, when considering the response to their RFP and in ultimately awarding the contract to the Downs. We reviewed the bids relating to the casino procurement process. It appeared the Downs was a responsible bidder as it appears that all bidders were reviewed and selected for additional inquiry through a bid committee assigned to the task by the Expo NM administration. As defined by 13-1-82, a responsible bidder is bidder who submits a responsive bid and who has furnished, when required, information and data to prove that his financial resources, production or service facilities, personnel, service reputation and experience are adequate to make satisfactory delivery of the services, construction or items of tangible personal property described in the invitation for bids. The Downs appears to have met this requirement as all bidders were asked to make presentations to the bid committee and clarify any information within the proposals for which the committee had inquiries. 2) Please perform procedures to determine whether Expo New Mexico failed to provide a copy of the notice or invitation for bids to any businesses that had signified in writing an interest in submitting a bid, in compliance with Section 13-1-104 (B) NMSA 1978. As indicated in 13-1-104, In the case of purchases made by other central purchasing offices, the invitation or notice shall be published at least once in a newspaper of general

circulation in the area in which the central purchasing office is located. Expo NM did utilize the local paper and advertised the request for proposal for one day and provided a 30 day response time. In addition 13-1-104 indicates Central purchasing offices shall send copies of the notice or invitation for bids involving the expenditure of more than twenty thousand dollars ($20,000) to those businesses that have signified in writing an interest in submitting bids for particular categories of items of tangible personal property, construction and services and that have paid any required fees. Expo NM did provide bid documents to all interested bidders. In addition, each bidder was asked to make presentation to the committee. 3) Please determine whether there is any evidence that the Downs participated in determining the specifications of the RFP, in violation of Section 10-16-13 NMSA1978. Per 10-16-13, No state agency or local government agency shall accept a bid or proposal from a person who directly participated in the preparation of specifications, qualifications or evaluation criteria on which the specific competitive bid or proposal was based. A person accepting a bid or proposal on behalf of a state agency or local government agency shall exercise due diligence to ensure compliance with this section. As part of our procedures, we inquired of Expo NM administration and external consultants, Mr. Dupey Bateman, to determine if the Downs was involved in any shape of manner with the bid process. The concern was mainly due to the fact that the Downs already maintained the Casino contract with Expo and may influence the bid/proposal specifications, qualifications or evaluation criteria in their favor. We found no evidence of such collusion and was not apprised of such involvement by the Downs. Given the time constraints and the verification of this piece of the bid process by third parties, there is no evidence suggesting participation in the bid/proposal process by the Downs. 4) Please determine whether there is evidence the Downs had information that was pertinent to the bid that other bidders did not have, in violation of Sections 1.4.1.16 and 1.4.1.19 (D) (3) NMAC, and how this information was obtained. As indicate in the previous item, it does not appear that the Downs was provided information regarding the bid that was not provided to other bidders. The Downs appears to have some advantage as the incumbent bidder; however, this is typical of the bid process and not a violation of 1.4.1.16. In addition, all bidders were evaluated by a bid committee and asked to make presentations to the committee. This indicates all timeliness issues and potential amendments; none of which were noted, could have been addressed by potential bidders at that time. Therefore, it does not appear that there was a violation of 1.4.1.19 (D) (3) which indicates furnish to other bidders information given to one bidder if such information will assist the other bidders in submitting bids or if the lack of such information would prejudice other bidders.

5) Please determine whether there was an unreasonably quick response required to the large complicated RFP, undermining the purpose of the Procurement Code stated in Section 13-129 NMSA 1978 and potentially violating of Section 1.4.1.16 NMAC (allow bidders reasonable time to prepare for bids). 13-1-29 indicates The purposes of the Procurement Code are to provide for the fair and equitable treatment of all persons involved in public procurement, to maximize the purchasing value of public funds and to provide safeguards for maintaining a procurement system of quality and integrity. As such, the intention of the statute appears to be to insure sufficient time for all bidders to respond to complex bids, Additionally, 1.4.1.16 indicates Bidding time is the period of time between the date of distribution of the IFB and the time and date set for receipt of bids. In each case bidding time shall be set to provide bidders a reasonable time to prepare their bids. In no case shall the bidding time be shorter than the time required for publication under Section 1.4.1.17 of this rule. Section 1.4.1.17 states, The IFB or notice thereof shall be published not less than ten calendar days prior to the date set for the opening of bids. In this case, the bidders were given 30 days to submit their bids and all bidders presented the proposal the last day before the opening of bids by the committee. Although, 30 days may be subjectively construed as not enough time, it does meet and exceed the State NMAC requirement of 10 days. GPS did add a finding to the financial statements relating to the 30 days as this seemed like a short amount of time to prepare such a complex bid proposal. 6) Please determine whether the substantive selection of the contractor took place at the evaluation committee level and whether the State Fair Commission approval was not the substantive approval of the contractor. If such is concluded, then the State Fair Commission did not comply with the requirement of Section 10-15-1 H (6) NMSA 1978, that the selection of a contractor be made in an open meeting. Per review of the process and inquiry of third party, the evaluation process was performed by the bid committee and presented to the Expo NM board. The Board then approved the suggested proposal. The matter in which the approval of the contract appears to be in compliance with 10-15-1 H (6). 7) Please determine whether the public interest was advanced regarding whether the State received a fair amount of revenue from the Down. Did the new lease with the Downs decrease the amount paid for rent compared to the previous contract with the Downs? Please consider compliance with Section 10-16-3 NMSA 1978. Per review of the contracts, it appears that the new contract does increase the amount paid to Expo NM in current and future years. The two bids submitted maintained different lease and pay methods. In the case of the Downs lease, payments under the new lease are processed as monthly payments. In addition, the Downs, i.e. contractor, is now responsible for maintenance and upkeep of facilities, which would also be considered an increase in

revenues and Expo NM is no longer responsible for such costs as it was under the previous lease. Again, this is a difficult question to answer given the structure of the bids and the contracts; however, it does appear the benefit to Expo NM was increased through the new contract with the Downs. 8) Please evaluate whether the terms of the current Downs contract is being adhered to and enforced by Expo New Mexico. Per review of the current payments and contract terms, it appears the Downs is in compliance with the new contract. In addition, we discussed compliance with Expo NM and third party contractors, Mr. Dupey Batemen: all parties indicated that the new contract has been complied with. 9) The LFC Report states (on page 12) that the Expo New Mexico does not have enough money to pay its bills and is losing money on a daily basis. For Example; the largest amount, $1.9 million, is owed to the Risk Management Division of the General Services Department for insurance coverage dating back to FY09 (see above). Please determine whether Expo New Mexico has created debt in violation of Section 12-6-20 NMSA 1978, related to these considerations and if Expo does not have enough money to pay creditors or to finance day-to-day operations. Expo NM continues to maintain cash flow issues due to previous management decisions. There does appear to be a balance still owed to the General Services Department; however, it appears that the balance is being addressed by Expo NM administration and the GSD. The amount has been presented as a liability on the organizations financial statements. It appears the organization has made strides to be current on daily operational liabilities. It is undeterminable if the organization has created debt as the item indicated is due to another State agency and would be eliminated in a consolidated statement for a CAFR report.

Should you have questions or require additional information, please contact me at (505) 856-2741 or by e-mail at jgriego@gpsaccounting.com. Sincerely, GRIEGO PROFESSIONAL SERVICES, LLC

J.J. Griego, CPA