2010 - nmgcb.sks.comnmgcb.sks.com/uploads/filelinks/c3da00ae07fc4a6aa59329988e25bb… · demesia...

New Mexico Gaming Control Board

2010

2010

Table of ContentsMessage from the Chair

Mission StatementBoard’s Commitment

The Board Executive Staff

Operational DivisionsTribal Gaming Venues

Gaming LicenseesManufacturers & Distributors

Child Support Enforcement EffortsResponsible Gaming

Quick FactsAuditor’s Report

123479

12131718181920

Dear Governor Richardson and members of the New Mexico Legislature:

Fiscal year 2010 was a productive year for the New Mexico Gaming Control Board. Regulating the gaming industry in New Mexico, as in all gaming jurisdictions, can be a challenging drill. As we celebrate the begin-ning of our 12th year of operation we are seeing a fairly stable stream of tax revenue-sharing dollars flow di-rectly into the state’s general fund, although the fragile economy has certainly curtailed the robust increases we would normally expect to see.

We approach the future with cautious exuberance. On one hand the proposed racetrack/casino in Raton failed to materialize, on the other, a new Tribal casino did open on the Navajo Nation near Gallup. The Board, and our 58 staff members, welcome the gaming expansion authorized by the 2007 amendments to the Tribal gaming compacts.

While our national economy continues going through a rough patch, the future of gaming in New Mexico remains sound.

It is in that context that we are pleased to submit to you our annual report for fiscal year 2010, as required by the Gaming Control Act.

Respectfully submitted,

David L. Norvell, Chairman New Mexico Gaming Control Board

1

The mission of the Gaming Control Board is to uphold the integrity of gaming regulations at licensed racetracks and nonprofit organizations, and to monitor tribal gaming activity in the state. The Gaming Control Board qualifies gaming venues through a rigorous licensing and certification process designed to ensure a fair and honest gaming environment, while recognizing the importance of gaming tax revenue to the state economy.

Mission Statement

2

The Gaming Control Board is committed to the principles of professionalism, accountability and integrity. Using these principles the Board focuses on protecting the public interest, evaluating and responding to licensee needs and critical issues, and maintaining a flexible, innovative regulatory approach that can be quickly adapted to changing circumstances and environment.

The Board’s Commitment

3

David Norvell was appointed by Governor Bill Richardson to be the Chair of the Board. Mr. Norvell was born in Kansas City, Missouri and was raised in Bartlesville, Oklahoma. Mr. Norvell graduated from Bartlesville College High in 1952. In 1955, he received a B.S. degree from Northeastern State Col-lege in Tahlequah, Oklahoma, and L.L.B (now Juris Doctor) from University of Oklahoma School of Law in 1958. Mr. Novell began practicing law in Clovis, New Mexico in 1958, obtaining licenses in both Oklahoma and New Mexico. He has practiced law in Clovis from 1958 to 1971 and in Albuquerque since 1976.

Mr. Norvell was elected to the New Mexico House of Representatives from Curry County in 1962 and served until 1970. He was elected Majority Floor Leader in 1967 and Speaker of the House in 1969. In 1970, Mr. Norvell was elected Attorney General and served until 1975. Mr. Norvell served as Chair-man of the New Mexico Crime Victims Reparation Commission from 2003 to July 2005 and served as a member of the New Mexico Racing Commission from January 2005 to July of 2006 and was elected its Chairman in November 2005.

Demesia Padilla was appointed by Governor Bill Richardson to fill the certified public accountant position on the Board. She is a native New Mexi-can, raised in Albuquerque’s South Valley. Ms. Padilla graduated from the University Of New Mexico Anderson School Of Management with distinction. She is a licensed certified public accountant in the states of Nevada and New Mexico. In 1985 she began her accounting career with a national accounting firm in Las Vegas, Nevada. Prior to starting her accounting firm, she was an Internal Revenue Service Agent in the Albuquerque office. Ms. Padilla has been recognized as an outstanding South Valley citizen and distinguished Rio Grande High School Alumni. Ms. Padilla is an active member in her commu-nity and church serving on numerous boards and committees. Currently she is the chairperson for the Bernalillo County Audit Committee. She is excited to meet her new challenges as a Board member and to serve New Mexicans with integrity.

The Board

4

Marc Prelo brings over forty years of legal experience to the New Mexico Gaming Control Board. He was appointed to the Gaming Control Board by Gov-ernor Bill Richardson on September, 2009 to fill a vacancy. Prior to being ap-pointed to the Board, Mr. Prelo practiced law in Ruidoso, New Mexico for 14 years including two years as the city attorney for Ruidoso. Mr. Prelo was in pri-vate practice in Albuquerque for 33 years handling a broad range of matters. Mr. Prelo was admitted and practiced before the 5th and 10th Federal Circuit Courts of Appeal, the District of Columbia Circuit, and the United States Supreme Court where he successfully argued Martinez vs. Santa Clara, a landmark Tribal Sov-ereignty case.

Prior to entering private practice, Mr. Prelo was one of three lawyers who started the first Federal Public Defenders office in the state of New Mexico. He also was an associate instructor at the American Indian Law Center at the University of New Mexico School of Law. Mr. Prelo’s first employment as an attorney was serving as a law clerk to the Honorable H. Vearle Payne, United States District Court for the District of New Mexico.

Mr. Prelo was born in Alamogordo, New Mexico and has resided in New Mexico most of his adult life. His education began in a two room school house in Bent, New Mexico. He completed a BBA from UNM in 1956 then served in the U.S. Navy as a communications officer stationed in San Juan, Puerto Rico. He re-turned to UNM and received a Juris Doctor from the University of New Mexico School of Law in 1966.

Mr. Prelohas been married to Cecilia Ramos Prelo for 49 years. Cecilia devoted over 40 years to teaching and testing special needs children in Albuquerque and Ruidoso Public Schools. Mr. and Mrs. Prelo have one daughter, Roxanna Prelo Friedrich, who is also a graduate of University of New Mexico School of Law.

Marty Cope, fills the ex-officio position on the Board as the Chair of the Racing Commission. She was appointed Chair of the Racing Commission in June of 2009.

5

Jim Peterson was born in Reno, Nevada in 1938 and raised in Haw-thorne, Nevada and Los Angeles, California. He completed high school dur-ing his four years in the Air Force and from 1960 to 1962 attended Riverside City College, Riverside, CA. He was Student Body President of, and received his B.A. degree from, California State University, Fullerton, CA in 1964. He was employed by the County of Los Angeles, CA as a Probation Officer from 1964 to 1967 and graduated from Loyola University School of Law, Los An-geles, CA in June, 1968. From 1967 to 1971 he was employed as a lawyer and real estate representative for Thrifty Drug Stores, Los Angeles, CA. On January 9, 1969, he became a member if the California State Bar Association and the U.S. District Court for the District of California. Mr. Peterson is also a member of the Board of Directors of Compass Bank in Albuquerque.

In November, 1971 he moved to Albuquerque, New Mexico and established Peterson Properties, specializing in the development, management, and leasing of high-quality neighborhood shopping centers and major tenant free-standing developments such as Walgreen Drug Stores. Over the past thirty-seven years, Peterson Properties has successfully developed, leased and managed more than thirty shopping centers containing more than 3 million square feet of retail and office space and more than one hundred-twenty five freestanding national tenants, the majority of which were Walgreen Drug Stores. Peterson Properties maintains offices in Albuquerque and Farming-ton, New Mexico.

He has been married for thirty-eight years to Mary who is from Paducah, KY. She is a “cat” person and he has three small dogs. Both are avid golf-ers. Their charitable interests are primarily served through establishment of the Peterson Learning Center at Manzano Day School, Sandia Prep, and the Albuquerque Academy. The Learning Centers identify and help students with learning differences. He has four children: Mae, JC, Doug (two are at-torneys and all three work with him at Peterson Properties) and Robin (She is a graduate of Mississippi State Veterinarian School in Starkville, Mississippi and currently lives and works in Eugene, Oregon with her family.). He has five grandchildren, ages 10 weeks through eighteen.

6

John Monforte, of Albuquerque, is the Executive Director. Previously, Mr. Monforte was the Executive Director of the Acoma Gaming Commission, a posi-tion he has held since 1999. During his service in Indian gaming, Mr. Monforte was appointed in 2001 to the National Indian Gaming Commission Minimum Internal Control Advisory Committee that redrafted the federal standards. He has taught several courses for the National Indian Gaming Association Com-missioner Certification program. Mr. Monforte also served as the New Mexico representative for the National Tribal Gaming Commissioners/Regulators Board of Directors from 2002-2004 and then served as Treasurer until 2006. Outside of Indian gaming, Mr. Monforte has served as a Guardian ad litem since 2003 representing the best interests of neglected and abused children.

Mr. Monforte was born in Wichita, Kansas. He received a Bachelors Degree in History and in Political Science from Kansas State University and a law degree from the University of Kansas School of Law.

Executive Staff

Gregory J. Saunders, of Albuquerque, serves as the Board’s Deputy Ex-ecutive Director and Chief Information Officer. Prior to joining the Board, Mr. Saunders successfully built the primary Information Technology infrastructure for the New Mexico Children, Youth and Families Department where he was responsible for implementing a new client tracking systems and connecting 72 statewide sites to the central location. Mr. Saunders gathered a top notch team at the Gaming Control Board, and implemented a comprehensive Regulatory Control System to electronically monitor and control statewide gaming activities. Mr. Saunders holds a Bachelor Degree in Business and a Masters in Manage-ment.

7

Frank A. Baca is the General Counsel of the New Mexico Gaming Con-trol Board. His role is to advise the board on legal and policy-making mat-ters, and to represent the Board in all legal matters related to gaming in New Mexico. Mr. Baca’s office closely administers the legal requirements of the tribal gaming compacts signed in December 2001 and the amended 2007 compacts. For twenty-two years prior to his Board appointment, he practiced civil litigation law in the areas of business, real estate and injury claims.

Mr. Baca has a long history of involvement with community and economic development groups, including having served on the board of the Rio Grande Community Development Corporation for 12 years, ten years as president and on the board of the New Mexico Hispanic Bar Association for six years, two as president. A native of New Mexico, Mr. Baca received a B.A. in history at Yale University in 1977, and earned a law degree from the University of New Mexico School of Law in 1981.

Mr. Baca was recently named as one of the top 25 attorneys in New Mexico by New Mexico Business weekly.

Georgene Louis, Esq., State Gaming Representative - Georgene Lou-is, a Pueblo of Acoma tribal member, was appointed as the State Gaming Representative in August 2007. As the State Gaming Representative, her primary duty is to monitor compliance of the 2001 and 2007 Amended Tribal-State Class III Gaming Compacts entered into by 13 Indian tribes and the State of New Mexico. The State Gaming Representative is responsible for the actions of the State set out in the tribal gaming compacts.

Prior to her appointment, Ms. Louis worked in private practice at Chestnut Law Offices in Albuquerque, New Mexico, where she concentrated on Indian law and Indian affairs, including gaming matters related to the development of a gaming enterprise board, tribal gaming and liquor ordinances, gaming related contracts, and federal gaming laws. Ms. Louis also served a three-year appointment as a member of the Acoma Business Enterprises Board of Directors.

Ms. Louis is Chair of the Indian Law Section of the New Mexico State Bar and Board of Directors President for the Acoma Boys & Girls Club. She is also actively involved in the American Bar Associations Young Lawyers Divi-sion, where she began by obtaining a Minorities in the Profession fellowship, participated as a member of Special Project: Choose Law Committee, and currently serves as an Assistant Editor for The Affiliate Newsletter.

Ms. Louis received her undergraduate dual degree in English and Philoso-phy from the University of New Mexico is 2000, and her law degree from the University of New Mexico School of Law in 2004. She is also a 2001 alumni of the American Indian Law Center’s Pre-Law Summer Institute.

8

The agency budget, financial management and contractual obligations are overseen by the Gaming Control Board’s Administrative Services Division (ASD). ASD prepares and submits the annual budget to the Department of Finance and Administration (DFA) and the Legislative Finance Committee (LFC) for their review and recommendations during the annual legislative session. The approved operating budget includes the categories of personnel services/employee benefits, contractual services, and other costs. ASD manages the operating budget and closes out the budget for each fiscal year ending on June 30. At the beginning of each fiscal year, ASD is also in charge of procuring and overseeing the annual agency audit.

ASD manages the procurement process for agency requests by preparing all requisitions and purchase orders. All contracts and lease agreements are prepared and maintained by ASD with the exception of Information Technology (IT) contracts, which are only maintained by ASD. The ASD staff also provides in-house customer service to the Gaming Control Board staff in matters such as travel reimbursement and supply requests, for which the financial staff is responsible.

Some of the financial functions ASD oversees are the accounts receivable, accounts payable, fixed asset inventory, agency supply inventory and the monthly audit of miscellaneous cash funds. The majority of the revenue generated under accounts receivable is from licensing fees, fines, and investigative and audit fees, which are submitted by licensed operators or applicants requesting licensure for both gaming and bingo and raffle. To ensure consistency in ASD’s daily operations, budget and financial functions are monitored closely.

Administrative Services

The Audit and Compliance Division continues to develop its processes and procedures to ensure compliance with Minimum Internal Controls Standards (MICS), ensure that Licensee assets are safeguarded and to preserve the integrity of gaming at all venues licensed in the State. The division focuses on verification of licensees’ financial viability and compliance with New Mexico gaming laws and Board rules, including the payment of gaming taxes. The Division ensures that services provided are efficient and effective in protecting resources from theft or misuse. Compliance reviews are completed three times per year for all nonprofit licensees and twice per year for racetrack licensees. Additionally, inspections of tribal gaming venues and review of revenue sharing calculations are performed annually.Compliance reviews verify that licensees are in compliance with all State statutes, Board rules, and Board MICS. Gaming auditors perform analyses of financial statements of all nonprofit and racetrack licensees that include, but are not limited to, a thorough review of balance sheets and income statements in order to assess financial condition. Gaming manufacturers’ and gaming distributors’ financial information is analyzed through review of Securities and Exchange Commission filings and annual audited financial statements, if the entity is publicly traded. Financial data on gaming activity from licensees are analyzed on a monthly basis for nonprofit gaming operators and annually for all other licensees to ascertain continued financial viability for providing products and/or services to the rapidly growing gaming industry in the State.

The Audit and Compliance Division also audits the quarterly Bingo, Raffle and Pull Tab reports submitted by licensees. These reports are reviewed for accuracy and compliance and reconciled to the monthly tax reports filed by licensees with the New Mexico Taxation and Revenue Department. This reconciliation ensures that appropriate Bingo taxes are paid timely to the State. The Audit and Compliance Division is comprised of uniquely qualified individuals with specialized knowledge and skills in the area of gaming auditing. The Division’s staff members hold advanced degrees and specialized certifications such as that of Certified Fraud Examiner(CFE) and Certified Public Accountant (CPA).

Audit and Compliance Division

Operational Divisions

9

Information Systems

The Information Systems Division (ISD) is the central Information Technology (IT) and Information Systems (IS) provider for the Gaming Control Board. The division’s mission is twofold. ISD is responsible for maintaining and supporting computer systems, network-telecommunications infrastructure and the application development needs of the Board, using the latest technology for Windows and web applications on the Intranet and Internet. ISD currently supports four field offices that utilize the ISD managed Wide Area Network (WAN). WAN connections provide secure access to a number of external law enforcement agencies and to the Internet. Additionally, ISD provides the focus for the development of IT and IS strategies and policies for the Board. ISD’s second mission is to manage the statutorily required casino-slot machine Central Monitoring System (CMS). This system ensures compliance with state gaming laws and provides the Board with secure automated regulatory control. The system tracks all monies wagered on any licensed gaming device in the State and is state-of- the-art in gaming regulatory tools.

The New Gaming Control Board’s Enforcement Division is comprised of State Certified Law Enforcement Agents who are responsible for the enforcement of the State Gaming Control Act, and the New Mexico State Criminal statutes, as well as the Rules and Regulations governing gaming activities within the State. The Enforcement Division conducts criminal and administrative financial investigations, as well as conducting investigations and subsequent arrests of individuals violating criminal statutes. Agents seize illegal gaming devices, and refer cases for prosecution in the State’s district courts. The Board’s agents aid in the investigation and auditing process of the states gaming venues, and in the regulation of transportation and shipment of gaming media. The Board’s agents work in conjunction with law enforcement and regulatory agencies at the local, state, federal and tribal levels.

Enforcement Division

10

Tribal GamingThe Office of the State Gaming Representative, monitors compliance of the 2001 and 2007 Amended Tribal-State Gaming Compacts. The division consists of the State Gaming Representative, one Tribal Compliance Auditor and the Tribal Clerk.

In FY 2010, nine of the fourteen Tribes operated under the 2007 Amended Tribal-State Class III Gaming Compact with a sliding scale revenue sharing percentage between 9.25% and 10.75%. Five Tribes operate under the 2001 Tribal-State Class III Gaming Compact with an 8% revenue sharing amount.

Fourteen Tribes generated a total of $62,650,816 in revenue sharing and $931,208 in regulatory fees in FY 2010. The revenue sharing payments were based upon $690,509,897 of “net win” reported by the Tribes. These payments were deposited into the State General Fund.

The Office of General Counsel (OGC), consisting of three attorneys and three staff members, represents the Gaming Control Board in all legal matters including tribal gaming issues, administrative proceedings relating to licensures, revocations, exclusions and other gaming related activities, administrative appeals, Board rules, enforcement of the Gaming Control Act, Bingo and Raffle Act, and prosecution of criminal and civil violations.

In addition, the OGC provides advice to the Board on all legal and policy-making matters presented to it for consideration or decision. The Office of General Counsel facilitates the Board’s monthly meetings, special Board meetings and working sessions. The OGC also ensures the Board’s continued compliance with the Open Meetings Act and the Inspection of Public Records Act.

Office of General Counsel

The Licensing Division is responsible for ensuring all licensing efforts are designed to support the purpose of providing the citizens of New Mexico a fair and honest gaming environment under the Gaming Control Act and uphold the integrity of gaming under the Bingo and Raffle Act. This may only be accomplished by ensuring a stringent licensing process where the burden is on the applicant to prove they are qualified to hold the license, permit or certification.

The Licensing Division is responsible for reviewing all applications submitted by individuals seeking licensure under the Gaming Control Act and the Bingo and Raffle Act in the State of New Mexico. Licensing staff conducts a background check on each application to verify all information contained in the application, and other information gathered by the division is an accurate and a true representation of fact. The information is assessed and prepared for Board consideration. The Licensing Division provides continuous liaison with licensees to ensure compliance with the Gaming Control Act and Bingo & Raffle Act after licensure. It is necessary that organizations and individuals licensed in the State of New Mexico maintain good standing within their parent organization and the State.

Licensing

11

In FY 2010, the Office of the State Gaming Representative monitored fourteen gaming tribes. The tribes had a combined 24 (plus 2 proposed) gaming operations throughout the state.

12

New Mexico has 56 veteran’s and fraternal casinos spread throughout the state. Some of these organizations have been licensed since 1999 and they are allowed up to 15 slot machines. The proceeds from these games are used to support the club, support their communities and allow additional revenue for the state’s general fund.

13

New Mexico currently has five racetrack casinos. The first, Sunland Park, was licensed in February of 1999, followed quickly by Ruidoso Down, SunRay Park and The Downs at Albuquerque, all in 1999. The fifth racetrack casino, Zia Park, opened in 2004.

14

New Mexico has 94 licensed bingo and raffle operators across the state. The number of licensees in the various communities are shown on this map. A complete list of these licensees can be found on the following page. The money raised by these non-profit organizations through their bingo, pull-tab and raffle activities support themselves and various programs within their local communities. There is a very small tax (.05 of gross receipts) on these activities that goes directly to the state’s general fund. 15

AlamogordoFraternal Order of Eagles 4101Loyal Order of Moose Lodge 2016Space City Sertoma BingoVeterans of Foreign Wars Post 7686

AlbuquerqueAbyad Shrine TempleAmerican GI Forum MenAmerican GI Forum WomenAmerican Legion Post 13Ballut American Legion Post 49BPO Elks Lodge 461Duke City Sertoma ClubEdelweiss AM Rio Grande German/American ClubHeights Club, Inc.Kiddie Kollege of Albuquerque, Inc.Lit’l Lambs Day Care, Inc.Montessouri Education Found, IncMusic New Mexico StyleNM Amateur Hockey AssociationNM Confederate Historical SocietyNM Sheriffs’ & Police AssociationRed Rose of New MexicoSandia Mountain Lions ClubTix for KidsVeterans of Foreign Wars Post 401

AztecVeterans of Foreign Wars Post 614

BayardKnights of Columbus 9470Our Lady of Fatima Church

CarlsbadBoys & Girls Club of Carlsbad, Inc.San Jose Catholic ChurchVeterans of Foreign Wars Post 8703

ClovisAmerican Legion Post 25American Legion Post 117DAV Chapter 6Fraternal Order of Eagles 3245Knights of Columbus 4205Veterans of Foreign Wars Post 3015

DAV Chapter 2Luna County Commission on Aging

EspanolaKnights of Columbus 3314Sacred Heart Church

FarmingtonVeterans of Foreign Wars Post 2182

GallupBPO Elks Lodge 2053Gallup Community Service CenterSt. Francis Church and School

HobbsAmerican Legion Post 26Fraternal Order of Eagles 3189 Knights of Columbus 3225

Las CrucesAmerican Legion Post 10BPO Elks Lodge 1119Holy Cross Parish BingoKnights of Columbus 1226Mimbres-Paquime Connection, Inc.St. Genevieve Catholic Chruch

Las VegasAmerican Legion Post 24BPO Elks Lodge 408Veterans of Foreign Wars Post 1547

LoganAmerican Legion Auxillary Post 77

LordsburgBPO Elks Lodge 1813

Los AlamosColumbian ClubVeterans of Foreign Wars Post 8874

LovingtonAmerican Legion Post 68Independent Order of Odd Fellows 44Knights of Columbus 7040

Moriarty Moriarty Lions Club

QuestaVeterans of Foreign Wars Post 7688

RatonVeterans of Foreign Wars Post 1793

Red RiverRed River Chamber of Commerce

Rio RanchoBPO Elks Lodge 2500Italian American Association, Inc.Scholarship FoundationThe Eric J. Sanchez MemorialThe New Mexico Music Hall of Fame

RoswellBPO Elks Lodge 969DAV Chapter 4Fraternal Order of Eagles 3187Serenity Club, Inc.Sertoma Club of Roswell

Santa FeCollege of Santa Fe Alumni AssocVeterans of Foreign Wars Post 2951

Santa RosaAmerican Legion Post 36Guadalupe County Sr citizens Org. IncKinights of Columbus 5146

Silver CityAmerican Legion Post 18Knights of Columbus 3388Lulac Council 8003St. Francis Newman CenterSt. Vincents Church

SocorroDAV Chapter 24

Truth or ConsequencesLoyal Order of Moose Lodge 2050

TucumcariBPO Elks Lodge 1172Knights of Columbus 6937St. Anne’s ParishVeterans of Foreign Wars Post 2528

DemingBPO Elks Lodge 2799

Mesilla ParkOur Lady of Guadalupe

16

Aristocrat Technologies, Inc. Las Vegas, NVAtronic Americas, LLC Scottsdale, AZBally Gaming, Inc. Las Vegas, NVDigiDeal Corporation Spokane, WAElektroncek d.d. Las Vegas, NVGlory USA West Caldwell, NJIGT, Inc. Reno, NVKonami Gaming Las Vegas, NVShufflemaster, Inc. Las Vegas, NVSpielo Manufacturing Inc. New Brunswick, CanadaWMS Gaming, Inc. Chicago, IL

Aries Gaming, Inc. Albuquerque, NM FAMJAM, LLC. Albuquerque, NMHapp Controls Elk Grove, ILJJ Recreation, LLC Farmington, NMNew Mexico Gaming, LLC Albuquerque, NMRC Gaming Inc. Albuquerque, NM

Manufacturers

Distributors

17

Gaming Manufactures and Distributors

The Gaming Control Act and Board rules require that gaming operator licensees maintain a compulsive gambling plan. Racetrack gaming operator licensees are required to contribute one quarter of one percent of net slot revenues toward the prevention, education, and treatment of compulsive gambling. The Tribal-State gaming compacts impose the same requirement on tribal gaming operators. Monies set aside for compulsive gambling have been allocated to problem gambling counseling, personnel training for problem gambling behavior recognition, gambling help line advertisements, brochures that address problem gambling, participation in the New Mexico Problem Gambling Alliance, and crisis intervention and prevention programs.

During the 2009 regular session the legislature passed HB 763, creating a new process for attachment and enforcement of liens on gaming machine jackpots won by persons with outstanding child support obligations. Pursuant to this bill the Gaming Control Board, in conjunction with the Human Services Department Child Support Enforcement Division, has created a searchable electronic database that allows racetrack gaming operator licensees to determine whether winners of jackpots of $1,200.00 or more owe child support enforcement obligations to be collected by the Human Services Department. The Board also created processes and procedures required to be followed by racetrack gaming operators to ensure that such jackpots are retained by the racetrack gaming operator licensee and that the Human Services Department is notified, so it can take action to seize the jackpot if warranted.The creation of this database and lookup procedure has led to the collection of $51,363.53 in child support enforcement obligations.

The Gaming Control Board has also included in the electronic searchable database the names of persons who have self-excluded from a racetrack gaming operator licensee’s premises, pursuant to SB299, which was passed during the 2009 regular session, now incorporated as Section 60-2E-34.1 of the Gaming Control Act. This function of the database allows racetrack gaming operators to identify, exclude from their premises and confiscate the winnings of persons who have placed themselves on the self-exclusion list. The Gaming Control Board believes that this self-exclusion is a crucial component of problem gaming abatement.

Child Support Enforcement Efforts

Responsible Gaming

18

Type of Licensee 1st Q 2nd Q 3rd Q 4th Q FY Total

Gaming TaxRacetrack Operators $ 15,139,639 $ 14,780,208 $ 16,720,745 $ 16,292,465 $ 62,933,058Nonprofit Operators 292,356 284,309 304,455 300,514 1,181,634Total Operators 15,431,996 15,064,517 17,025,200 16,592,979 64,114,692Manufacturers 95,338 158,205 140,365 249,867 643,774Distributors 89,427 83,097 88,285 95,625 356,434Total Gaming Taxes $ 15,616,760 $ 15,305,819 $ 17,253,850 $ 16,938,470 $ 65,114,900

Gaming Machine Net WinRacetrack Operators $ 58,229,384 $ 56,846,955 $ 64,310,558 $ 62,663,327 $ 242,050,224Nonprofit Operators 2,923,559 2,843,088 3,044,553 3,005,141 11,816,340Total Machine Net Win $ 61,152,943 $ 59,690,042 $ 67,355,111 $ 65,668,468 $ 253,866,564

Average Daily Net Win Per Machine at Quarter End Racetrack Operators $243.55 $229.09 $ 266.14 $ 240.80 $247.98Nonprofit Operators $ 48.63 $ 46.45 $52.41 $ 46.19 $49.46

Amount Paid into Horse Racing PursesRacetrack Operators $ 11,645,877 $ 11,369,391 $ 12,862,112 $ 12,532,665 $ 48,410,045

Amount Designated for Problem Gaming Racetrack Operators $ 145,573 $ 142,117 $ 160,776 $ 156,658 $ 605,126

Charitable & Education Payments Non-Profit Operators $ 552,553 $ 537,344 $ 575,421 $ 567,972 $ 2,233,288

Gaming Machines at End of Each QuarterRacetrack Gaming Machines 2692 2681 2679 2670Non-Profit Gaming Machines 647 653 653 653

Active Work Permits at End of Each QuarterKey Applications 396 391 390 392Work Permit Employees 946 904 945 1075

TribalRevenue Share $15,872,502 $15,070,508 $15,633,131 $16,074,675 $62,650,816

Bingo, Raffle and PullTabsGross Revenue $ 6,907,842 $ 6,692,032 $ 7,235,035 $6,403,222 $ 27,175,1310.5% Taxes Paid $ 34,539 $ 33,218 $ 36,175 $ 32,016 $ 135,948

19

Quick Facts

Auditor’s Report

TABLE OF CONTENTS

Page OFFICIAL ROSTER ....................................................................................................................................... i REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ..................................................... 1-2 MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) ........................................................ 3-13

FINANCIAL STATEMENTS

STATEMENT OF NET ASSETS ............................................................................................................. 14

STATEMENT OF ACTIVITIES ................................................................................................................ 15

BALANCE SHEET – GOVERNMENTAL FUND...................................................................................... 16

RECONCILIATION OF THE BALANCE SHEET GOVERNMENTAL FUND TO THE STATEMENT OF NET ASSETS – GOVERNMENTAL ACTIVITIES ........................................ 17

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – GOVERNMENTAL FUND ..................................................................................... 18

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES .............................................................................................................. 19 STATEMENT OF REVENUES AND EXPENDITURES (BUDGETARY BASIS) .......................................................................................................................... 20 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES – AGENCY FUND ....................................... 21 NOTES TO FINANCIAL STATEMENTS ............................................................................................ 22-38

SUPPLEMENTARY INFORMATION

SCHEDULE OF CHANGES IN ASSETS AND LIABILITIES – AGENCY FUND – LICENSING AND BACKGROUND FEES ............................................................... 39 MEMORANDUM OF UNDERSTANDING ............................................................................................... 40

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS .............................................................................. 41-42 SCHEDULE OF FINDINGS AND RESPONSES ................................................................................... 43 EXIT CONFERENCE .............................................................................................................................. 44

i

State of New Mexico Gaming Control Board

OFFICIAL ROSTER

June 30, 2010

BOARD MEMBERS

David Norvell Board Chair Don E. Dutton Board Member Demesia Padilla Board Member Arnold Rael Ex-Oficio Member Jim Peterson Public Member

ADMINISTRATION

John Monforte Executive Director Gregory J. Saunders Deputy Executive Director Frank Baca General Counsel Cynthia M. Ortega-Armijo Administrative Services Division Director

-1-

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Hector H. Balderas New Mexico State Auditor and David Norvell, Chair State of New Mexico Gaming Control Board Albuquerque, New Mexico We have audited the accompanying financial statements of the governmental activities, the general fund, the budgetary comparison of the general fund, and the aggregate remaining fund information of the State of New Mexico Gaming Control Board (the Board) as of and for the year ended June 30, 2010, which collectively comprise the Board’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Gaming Control Board’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. As discussed in Note B1, the financial statements of the State of New Mexico Gaming Control Board are intended to present the financial position, and the changes in financial position of only that portion of the governmental activities, each major fund, and the aggregate remaining fund information of the State of New Mexico that is attributable to the transactions of the Gaming Control Board. They do not purport to, and do not, present fairly the financial position of the State of New Mexico as of June 30, 2010, or the changes in its financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America.

-2-

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the general fund and the aggregate remaining fund information of the Board as of June 30, 2010, and the respective changes in financial position and the respective budgetary comparison of the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 19, 2010, on our consideration of the Gaming Control Board’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management’s Discussion and Analysis on pages 3 through 13 are not a required part of the basic financial statements, but are supplemental information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the Management’s Discussion and Analysis. However, we did not audit the information and express no opinion on it. Our audit was performed for the purpose of forming opinions on the basic financial statements of the Board. The accompanying Schedule of Changes in Assets and Liabilities-Agency Fund-Licensing and Background Fees and Memorandum of Understanding are presented for purposes of additional analysis and are not a required part of the basic financial statements of the Board. Such schedule and information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Atkinson & Co., Ltd.

Albuquerque, New Mexico November 19, 2010

-3-


MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Required Supplementary Information

June 30, 2010 and 2009

This discussion and analysis of the New Mexico Gaming Control Board (Board) provides an overview of financial activities for the fiscal year ended June 30, 2010. It should be read in conjunction with the financial statements, which begin on page 14. This section will assist the reader in understanding the following:

• Highlight significant financial issues; • Provide an overview of the Board’s financial activity; • Identify changes in the Board’s financial position; • Identify any material deviation from the approved budget; and • Identify issues or concerns.

Financial Highlights The Board strictly regulates the racetrack casinos and nonprofit clubs to assure that gaming revenues benefit the State general fund and state economy. Pages 3-5 highlight the financial information of the racetrack casinos and nonprofit clubs. This information is tracked internally by the Board and is unaudited. Gaming related payments to the State of New Mexico generated as a result of racetrack and nonprofit gaming activity regulated by the Board, totaled $65,114,900. These revenues are billed to gaming operators by the Board and collected by Taxation and Revenue Department for deposit to the General Fund. Our Board also guarantees that the horseracing purses, totaling $48,410,045, are disbursed. The racetrack and nonprofit gaming operators also paid $605,126 to various programs to address problem gambling. Charity payments from gaming totaled $2,233,288 in fiscal year 2010. Gaming manufacturers and distributors self report and remit gaming taxes to Taxation and Revenue Department. (See Graph A-4). The Board also monitors tribal gaming in the State in part to ensure that the proper revenue sharing and regulatory fees are paid to the State in accordance with the 2001 Compact and the 2007 Addendum to the Compact. The Tribes and Pueblos paid a combined $63,976,857 to New Mexico in FY 2010. The Tribes and Pueblos also paid out $1,726,275 to programs that address problem gambling. (See Graph A-3). Total gaming revenues including horse racing purses, problem gambling, charities, and Tribal revenue sharing totaled $182,202,439 for fiscal year 2010.

-4-


MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) - CONTINUED


June 30, 2010 and 2009

Graph A-1

Graph A-2

-5-




June 30, 2010 and 2009

Graph A-3

Graph A-4

Note: Gaming revenues include gaming taxes from racetracks & nonprofit clubs, contributions to horsemen's purses by racetracks, contributions to problem gambling programs by racetracks, and charitable contributions by nonprofit clubs. Tribal revenues include revenue sharing payments, regulatory fees, and problem gambling payments by Tribes.

-6-




June 30, 2010 and 2009

The following schedule compares the specific revenues for the last five fiscal years.

2006 FY Total

2007 FY Total

2008 FY Total

2009 FY Total

2010 FY Total

Gaming taxes from licensees $ 61,884,223

$ 65,648,862

$ 67,090,591

$ 69,204,440

$ 65,114,900

Bingo Taxes from Licensees 50,453

120,979

128,166

128,882

135,948

Horse racing purses 45,926,431

48,859,090

49,715,682

51,447,316

48,410,045

Problem Gambling-Nonprofits & Racetracks 574,080

610,739

621,446

643,091

605,126

Charities (j) 3,669,044

5,521,344

6,588,562

6,353,422

2,233,288(k)

Subtotal (Gaming & Bingo/Raffle) 112,104,231

120,761,014

124,144,447

127,777,151

116,499,307

Problem gambling- Tribal (g) 1,559,515

1,697,770

1,777,869

1,761,321

1,726,275

Tribal Revenue Sharing and Regulatory fees 49,722,363 (d)

54,819,248(e)

66,949,444(h)

65,939,241(i)

63,976,857(l)

Subtotal (Tribal) 51,281,878

56,517,018

68,727,313

67,700,565

65,703,132

TOTAL $ 163,386,109

$ 177,278,032

$ 192,871,760

$ 195,477,716

$ 182,202,439

FY 06 (c)

FY 07 (f)

FY 08

FY 09

FY 10

Budget $ 5,859,900 $ 6,968,490 $ 6,332,600 $ 6,308,700 $ 5,889,300

NOTES: Note: $91,000,000 in back payments by Tribes for the 97 Compacts was received in FY 2002 but not included in the chart above.

*In 2001, the Tribes were not paying on the '97 Compacts. No revenue was generated.

**Revenue sharing and Regulatory fees on the 2001 Compacts began the last quarter of FY02.

(a) Does not include $25 million Mescalero payment AND includes $596,288 state regulatory fee payments.

(b) includes $476,132 regulatory fees

(c) Does not include $2.2 million special appropriation

(d) includes $552,252 regulatory fees

(e) Includes $53,918,633 for revenue sharing and $900,615 for regulatory fees.

(f) Includes $819,390 FY06 Special Appropriation Encumbrance for new Central Monitoring System

(g) These figures are based on a quarter of one percent of Net Win as reported to the New Mexico Gaming Control Board (NMGCB). The figures

are subject to change upon independent verification by the NMGCB or upon receipt of additional information.

(h) Includes $65,488,441 for revenue sharing and $1,461,003 for regulatory fees.

(i) Includes $64,292,307 for revenue sharing and $1,646,934 for regulatory fees.

(j) Includes charitable contributions from both gaming and bingo & raffle starting in FY06

(k) Includes only contributions from gaming; Bingo & Raffle Act effective 7/1/09 eliminated the requirement for charity distributions

(l) Includes $932,059 for regulatory fees

-7-




June 30, 2010 and 2009

Overview of Financial Activity

The Gaming Control Board receives 100% of its funding from the General Fund appropriation. As shown in Graph A-3, expenditures against the budget fiscal year end 2010 appropriation were broken down in the following categories: 69% for personal services and employee benefits, 13% for contractual services, and 18% for other costs.

Budgetary expenditures percentages by category did not differ significantly from the prior year.

Using This Audit Report

Financial data presented in these financial statements is for the activities of the Gaming Control Board as a single agency. It does not purport to represent the State of New Mexico as a whole. Government-Wide Financial Statements The government-wide financial statements include the Statement of Net Assets and the Statement of Activities (pages 14 and 15). These statements report all assets and liabilities using the accrual basis of accounting. All current year revenues and expenses are reported regardless of when cash is received or paid.

Graph A-5 Budgetary Expenditure for FY10

Other Costs, 18%

Contractual Services, 13%

Personal Services & Employee

Benefits, 69%

Personal Services & Employee Benefits Contractual Services

Other Costs

-8-




June 30, 2010 and 2009 The government-wide financial statements include all activities of the Gaming Control Board with the exception of the fiduciary funds which arise from reimbursements from applicants and licensees and from fines. General fixed assets, formerly reported as a separate account group, are included in these financial statements. Monies to finance these activities are 100% State General Fund appropriations.

Fund Financial Statements Due to the small size of the Board, the only individual governmental fund, the General Fund, is considered to be a major fund because only individual governmental or individual enterprise funds can be considered for major fund status. Presentations of fund financial statements begin on page 16. The Board’s two kinds of funds - governmental and fiduciary – are considered as separate accounting entities. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, expenses and other financing sources or use. Governmental funds – All of the Board’s basic services are reported in governmental funds, which focus largely on the establishment of an appropriation by the state legislature and the expenditure of this money in accordance with a budget. Funds not expended or encumbered at year end revert to the general fund. These funds are reported using an accounting method called modified accrual accounting, which measures cash and other financial assets that can readily be converted to cash. The differences between governmental activities and governmental funds are reconciled on pages 17 and 19. Fiduciary funds – The fiduciary funds are used to report assets held on behalf of the State of New Mexico and are not available to support Board activities. The reporting focus is upon net assets and changes in net assets and employs the accrual basis of accounting. These funds, once earned, are revenues of the General Fund of the State of New Mexico.

-9-




June 30, 2010 and 2009

Financial Analysis of the Agency as a Whole

Highlights The New Mexico Gaming Control Board was established to regulate limited gambling activity at racetracks and certain veteran and fraternal organizations, to monitor Tribal gaming, and is responsible for carrying out public policy on gambling in these venues. In 2005, the Board was given responsibility for regulating the Bingo and Raffle Act. The New Mexico Gaming Control Board is funded by appropriations from the State’s General Fund and operates a computerized Central Monitoring System. This system is a management, control and monitoring system that connects, via direct communications lines, to every licensed gaming device in the State (Non-Tribal). This system allows the Board to monitor all activity on each slot machine and to remotely verify the software in a gaming machine to assure that it is compliant with all applicable statutes and rules. It also allows, by Board order, the immediate remote disabling of any machine or venue for any non-compliance issues. The Board has operated such a system since 1998 with an efficiency rate over 99.9%.

Table A-1 Condensed Statement of Net Assets

Governmental Activities 2010 2009 Current assets $ 647,496 $ 259,154 Capital and non-current assets (net of depreciation) 604,090 1,015,310 Total assets 1,251,586 1,274,464 Current liabilities 810,344 418,310 Compensated absences payable, less current portion 43,757 65,610 Total liabilities 854,101 483,920 Net assets: Invested in capital assets 604,090 1,015,310 Unrestricted (deficit) (206,605) (224,766) Total net assets 397,485 790,544 Total liabilities and net assets $ 1,251,586 $ 1,274,464

-10-




June 30, 2010 and 2009 As summarized in Table A-1, net assets of $397,485 represent the difference between assets and liabilities of the Board. Total assets decreased by $22,878, while total liabilities increased by $370,181. Total assets decreased mainly due to depreciation expense for the year. Total liabilities increased because of higher reversion payable due at year end compared to the previous year.

Condensed Statement of Activities

Governmental Activities 2010 2009 Total expenses $ (6,262,596) $ (6,729,063) Total revenues (net of reversion) 5,869,537 6,292,272 Decrease in net assets (393,059) (436,791) Beginning net assets, as previously reported 790,544 1,227,335 Ending net assets $ 397,485 $ 790,544

During the year ended June 30, 2010, total expenses decreased by $466,467 reflecting budget decreases and required furloughs in fiscal year 2010. Government-wide expenses are $6,262,596 and include depreciation and an accrual for compensated absences. Compensated absences represent the amount of accrued but unused vacation time at current rates to be paid from future appropriations. See notes to the financial statements beginning on page 22. The recognition of depreciation is an attempt to match the usage of capital assets to the revenues of the agency by year. This change in net assets does not necessarily reflect only the amount of capital assets purchased net of current year depreciation during the year.

-11-




June 30, 2010 and 2009

Financial Analysis of the Governmental Funds

The Gaming Control Board operates one governmental fund in which all activity related to gaming regulation and control is recorded. The financial statements beginning on page 14, present the financial position and results of operations for the governmental activities. Funding for the governmental funds is 100% from annual appropriations from the New Mexico State Legislature. Governmental fund expenditures differ from the government-wide expenses for 2010 and 2009 as follows: 2010 2009 Governmental fund expenditures $ (5,869,366) $ (6,292,272) (Increase) decrease in liability for compensated Absences 17,990

(21,975)

(Excess) deficiency of depreciation over capital outlay (411,220) (414,816) Agency expenses $ (6,262,596) $ (6,729,063)

Financial Analysis of the Budgetary Basis of Accounting

The annual operating budget is approved by the Department of Finance and Administration. Over the course of the year, the Board adjusts its budget as authorized under the Appropriations Act. Comparison of actual expenditures on a budgetary basis to approved budget amounts is presented on page 20. As demonstrated by Graph A-6, budgetary basis expenditures were within approved budgeted amounts.

-12-




June 30, 2010 and 2009

Graph A-6

The difference in budget to actual expenditures for the total categories is $406,334, which will be reverted to the State General Fund. There were no unexpected budget variances during the year.

Capital Assets

The following net change occurred in the capital assets during the years ended June 30, 2010 and 2009.

2010 2009 Net capital assets at beginning of year $ 1,015,310 $ 1,430,126 Capital assets purchased - - Current year depreciation (411,220) (414,816) Net capital assets at end of year $ 604,090 $ 1,015,310

Consistent with application of GASB No. 34, the Board has recognized depreciation for assets during the fiscal year of $411,220. At June 30, 2010, the total accumulated depreciation for the Board was $3,931,873. There were no capital asset purchases during fiscal year 2010 and 2009.

-13-




June 30, 2010 and 2009

Currently Known Facts, Decisions or Conditions Expected to Impact the Board’s Financial Position and Results of Operation

The Board requested, and received, a loan from the State Board of Finance to cover a budget shortage in FY11. The loan was necessary due to severe budget cuts during the last three fiscal years and was needed in order for the Board to adhere to the 50% budget rule. The loan must be paid back by June 1, 2011. The Board continues to see an 18 - 19% vacancy rate and that rate will rise if the budget deficit continues. The Board has two legal issues that continue to impact the budget. One is the appeal by La Mesa Park and their attempt to restore their gaming license, and the second includes the various compliance issues with the compacted tribes. The compact issues will likely lead to arbitration and will incur significant costs.

Contacting the Board’s Financial Management

This financial report is designed to provide citizens, taxpayers, customers, legislators, and other stakeholders a general overview of the Board’s finances and to demonstrate the Board’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact:

New Mexico Gaming Control Board 4900 Alameda Blvd. NE

Albuquerque, NM 87113 505-841-9700

The accompanying notes are an integral part of this financial statement. -14-


STATEMENT OF NET ASSETS

June 30, 2010

GovernmentalActivities

CURRENT ASSETS Investments with State Treasurer 636,261$

Petty cash 600 Prepaid expenses 10,635

Total current assets 647,496

NON-CURRENT ASSETS Capital assets, net of accumulated depreciation 604,090

Total assets 1,251,586$

CURRENT LIABILITIESAccounts payable 36,261$ Accrued payroll, payroll taxes and benefits 193,837 Compensated absences payable, current portion 174,083 Due to state general fund-reversion fiscal year 2010 406,163

Total current liabilities 810,344

NON-CURRENT LIABILITIESCompensated absences payable, less current portion 43,757

Total liabilities 854,101

NET ASSETSInvested in capital assets 604,090 Unrestricted deficit (206,605)

Total net assets 397,485

Total liabilities and net assets 1,251,586$

ASSETS

LIABILITIES AND NET ASSETS



STATEMENT OF ACTIVITIES

Year ended June 30, 2010

EXPENSES General government services $ (6,262,596)

Total expenses (6,262,596)

GENERAL REVENUES State general fund appropriation 6,275,700

Total revenues 6,275,700

Reversion to state general fund fiscal year 2010 (406,163)

Changes in net assets (393,059)

Net assets beginning of the year 790,544

Net assets, end of year $ 397,485

GovernmentalActivities



BALANCE SHEET – GOVERNMENTAL FUND

June 30, 2010

GeneralFund

ASSETS Investments with State Treasurer 636,261$ Petty cash 600 Prepaid expenses 10,635

Total assets 647,496$

LIABILITIES Accounts payable 36,261$ Accrued payroll taxes and benefits 193,837 Due to State general fund-reversion fiscal year 2010 406,163

Total liabilities 636,261

FUND BALANCE Reserved for petty cash 600 Reserved for prepaid expenses 10,635

Total fund balance 11,235

Total liabilities and fund balance 647,496$



RECONCILIATION OF THE BALANCE SHEET GOVERNMENTAL FUND TO

THE STATEMENT OF NET ASSETS – GOVERNMENTAL ACTIVITIES

June 30, 2010

Total fund balance - governmental fund 11,235$ Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets used in governmental activities are not current financial resources and therefore, are not reported in the governmental fund balance sheet. These assets consist of: Machinery and equipment 615,591$ Gaming machine electronic monitoring equipment and software 3,920,372 Accumulated depreciation (3,931,873)

Total capital assets 604,090

Some liabilities are not due and payable in the current period and, therefore, are not reported in the governmental fund balance sheet.

These liabilities consist of: Compensated absences (217,840)

Net assets of governmental activities 397,485$



STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE – GOVERNMENTAL FUND


GeneralFund

REVENUES Other -$

EXPENDITURES Current:

Personnel services 4,079,629 Other costs 1,024,238 Contractual 765,499

Capital outlay -

Total expenditures 5,869,366

OTHER FINANCING SOURCES (USES)State general fund appropriation, Laws of 2009, Chapter 28, Section 4 6,275,700Reversion to the state general fund - fiscal year 2010 (406,163)

Total other financing sources 5,869,537

NET CHANGE IN FUND BALANCE 171

Fund balance, beginning of year 11,064

Fund balance, ending of year 11,235$



RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES

June 30, 2010

Net change in fund balance - governmental funds 171$

Amounts reported for governmental activities in the statement of activities are different because:

Accrued compensated absences are recorded as expenses in the current year in the statement of activities, however, the corresponding amount is recorded as future funds to be provided in the governmental funds. 17,990

Depreciation expense (411,220)

Changes in net assets of governmental activities (393,059)$



STATEMENT OF REVENUES AND EXPENDITURES (BUDGETARY BASIS)


VarianceBudget Budget Actual Amount Favorable

General Fund Original Final Budgetary Basis (Unfavorable)Revenue: State general fund appropriations 6,283,900$ 6,275,700$ 6,275,700$ -$

Total revenue 6,283,900$ 6,275,700$ 6,275,700$ -$

Actual VarianceBudget Budget Amounts Favorable

General Fund Original Final Expended (Unfavorable)Expenditures: Personnel service 4,253,800$ 4,245,700$ 4,079,629$ 166,071$ Contractual services 784,600 799,600 765,499 34,101 Other services 1,245,500 1,230,400 1,024,238 206,162

Total expenditures 6,283,900$ 6,275,700$ 5,869,366$ 406,334$

Budgetary basis expenditures were equal to GAAP basis expenditures.



STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES - AGENCY FUND

Licensing and Background Fees Fund – (SHARE 95100)

June 30, 2010

ASSETS Investments with State Treasurer 21,765$ Accounts receivable 8,550

Total assets 30,315$

LIABILITIES Due to the State general fund 30,315$

Total liabilities 30,315$


NOTES TO FINANCIAL STATEMENTS

June 30, 2010

-22-

NOTE A – NATURE OF ORGANIZATION

The State of New Mexico Gaming Control Board (Board) was established by the Gaming Control Act enacted at the 1997 Session of the 43rd New Mexico State Legislature as House Bill 399, enrolled as Chapter 190, Laws of New Mexico, 1997, and codified at Section 60-2E-1 to 60-2E-62 NMSA. The Board is responsible for: Gaming Regulation – A body of rules and regulations to govern the conduct of gaming activities within New Mexico within the framework of the Gaming Control Act (Title 15, Chapter 1). Gaming Investigation and Enforcement – The Board is responsible for the enforcement of the statutes and regulations governing gaming activities within the State. As a significant part of its enforcement activity, it aims to investigate the backgrounds of persons applying for licensure, and to monitor the activities of gaming operations in the State to ensure that they are complying with the laws and regulations. Gaming Audit and Compliance – The Board is responsible for the enforcement of the statutes and regulations governing gaming activities within the State, determining compliance of gaming operators with minimum internal control standards and ensuring that all entities conducting gaming activities within the State report the activity and earnings fairly and accurately. Gaming Machine Electronic Monitoring – The Board is charged by statute with continuous electronic monitoring of all gaming machines licensed in the State at racetracks, fraternal organizations, and veterans’ organizations. It is also responsible for billing each operator licensee the gaming tax assessed by the Board’s central monitoring system. Tribal Gaming Monitoring – Under the provisions of the Gaming Control Act and the compacts signed by the State with the individual Gaming Tribes and Pueblos, the Board is charged with monitoring tribal gaming to ensure compliance with the compacts. The Board’s State Gaming Representative is the State’s liaison with the tribes. Gaming Licensing – The Board is charged by statute with licensing gaming machine manufacturers, distributors, and operators, and issuing work permits and key person certifications. The Board is also charged with the licensing of gaming machines.


NOTES TO FINANCIAL STATEMENTS – CONTINUED

June 30, 2010

-23-

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements for the Board have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The more significant accounting policies are described below. 1. Financial Reporting Entity

GASB Statement No.14, The Financial Reporting Entity, effective for periods beginning after December 15, 1992, establishes standards for defining and reporting on the financial reporting entity. The requirements of GASB No. 14 apply at all levels to all state and local governments. GASB No. 14 defines the financial reporting entity as consisting of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. This definition of the reporting entity is based primarily on the notion of financial accountability as the “cornerstone of all financial reporting in government”. A primary government is any state government or general-purpose local government, consisting of all of the organizations that make up its legal entity. All funds, organizations, institutions, agencies, departments and offices that are not legally separate are, for financial reporting purposes, part of the primary government. The Board, therefore, is part of the primary government of the State of New Mexico, and its financial data should be included with the financial date of the State. The State of New Mexico will present an audited Comprehensive Annual Financial Report inclusive of all agencies of the primary government for fiscal year 2010. No entities are considered component units of the Board. The Board’s sole fiduciary fund is not included with the government-wide presentations. 2. Basic Financial Statements The basic financial statements include both government-wide (based on the Board as a whole) and fund financial statements. The new reporting model focus is on either the Board as a whole, or major individual funds (within the fund financial statements). Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business type activities. In the government-wide statement of net assets, the governmental activities are presented and are reflected on a full accrual, economic resources basis measurement focus, which incorporates long-term assets, as well as long-term obligations. The Board did not have any business-type activities during the year ended June 30, 2010. The effect of material interfund activity is removed from the government-wide statements. There was no interfund activity during the year.



June 30, 2010

-24-

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

2. Basic Financial Statements - Continued The government-wide statement of activities reflects both the gross and net costs per functional category (education, labor, transportation, etc.) that are otherwise being supported by general government revenues. The statement of activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function of a business-type activity. The Board includes only one function (general government). When an expense is incurred for purposes when both restricted and unrestricted resources are available, the Board utilizes the restricted resources first. The net cost (by function of business-type activity) is normally covered by general revenues (taxes, intergovernmental revenues, interest income, etc.). The Board does not currently employ an indirect cost allocation system. This government-wide focus is more on the sustainability of the Board as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The Board has elected not to apply FASB pronouncements issued after November 30, 1989. The fund financial statements are similar to the financial statements presented in the previous accounting model. Emphasis here is on the major fund in the governmental category. Due to the limited fund structure of the Board, the only governmental fund is the general fund, which has been classified as a major fund, as required. The governmental fund statements are presented on a current financial resource and modified accrual measurement focus of accounting. This presentation is deemed more appropriate to (a) demonstrate legal compliance, (b) demonstrate the source and use of liquid resources, and (c) demonstrate how the Board’s actual experience conforms to the budget or fiscal plan. Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, a reconciliation is presented on the page following each statement, which briefly explains the adjustments necessary to transform the fund-based financial statements into the governmental activities column on the government-wide presentation. The Board’s fiduciary fund (agency fund) is presented in the fund financial statements. Since by definition these assets are being held for the benefit of a third-party and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements.



June 30, 2010

-25-


3. Basis of Presentation The financial transactions of the Board are maintained on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, expenditures or expenses, and other financing sources or uses. Government resources are allocated to, and accounted for, in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The various funds are summarized by type in the accompanying financial statements. The various funds are reported by generic classification within the financial statements. GASB No. 34 sets forth minimum criteria for the determination of major funds based on a percentage of the assets, liabilities, revenues or expenditures/expenses of either fund category or governmental and enterprise combined. Due to the fund structure of the Board, the only individual governmental fund, the general fund, has been classified as a major fund. The Board uses the following fund types: Governmental Fund Types The focus of governmental fund measurement (in the fund financial statements) is based upon determination of financial position and changes in financial position (sources, uses and balances of financial resources), rather than upon net income. The following is a description of the governmental fund of the Board.

General Fund – The general fund is the general operating fund of the Board. It is used to account for all financial resources except those required to be accounted for in another fund. The general fund is funded primarily from appropriations from the State of New Mexico general fund. This is a reverting fund. Agency Fund – Licensing and Background Fees – A fiduciary fund (agency fund) is used to account for funds received for licensing and background fees that are disbursed to the State of New Mexico general fund per State statute. The Board has no budgetary control over these funds and acts solely as an agent. Agency funds are purely custodial (assets equal liabilities) and thus, do not involve the measurement of results of operations.



June 30, 2010

-26-


4. Basis of Accounting and Measurement Focus

Basis of accounting refers to the point at which revenues and expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made, regardless of the measurement focus applied. The government-wide financial statements and the fiduciary financial statements are presented on an accrual basis of accounting using an economic resources measurement focus. The governmental fund in the fund financial statements are presented on a modified accrual basis using a current financial resources measurement focus. Modified accrual – All governmental funds are accounted for using the modified accrual basis of accounting and the flow of expendable financial resources. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., both measurable and available. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Available is defined as within 60 days of the fiscal year end. Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principal and interest on general long-term debt, if any, is recognized when due. Since the Board is funded entirely by State appropriations and all appropriations had been received by year-end, there were no revenues susceptible to accrual at June 30, 2010. 5. Budgets and Budgetary Accounting

The State Legislature makes annual appropriations to the Board. Legal compliance is monitored through the establishment of an annual budget. Annual budgets are adopted each fiscal year for the general fund. Amendments to the budget require approval by the State’s Financial Control Division of the DFA. The budgets presented have been so amended during the fiscal year. Per the General Appropriation Act, Laws of 2008, Chapter 28, Section 3, Item N, “For the purpose of administering the General Appropriation Act of 2008 and approving operating budgets, the State of New Mexico shall follow the modified accrual basis of accounting for governmental funds in accordance with the manual of model accounting practices issued by the department of finance and administration.” The budget is adopted on the modified accrual basis of accounting except for accounts payable accrued at the end of the fiscal year that do not get paid by the statutory deadline per Section 6-10-4 NMSA 1978. Those accounts payable that do not get paid timely must be paid out of the next year’s budget. Encumbrances related to single year appropriations lapse at year-end.



June 30, 2010

-27-


5. Budgets and Budgetary Accounting – Continued Budgeted appropriation unit amounts may be amended upon approval from the Budget Division of the State of New Mexico Department of Finance and Administration within the limitation as specified in the General Appropriation Act. The budget amounts shown in the financial statements are both the original appropriation and the final authorized amounts as legally revised during the year. The Gaming Control Board follows these procedures in establishing the budgetary data reflected in the financial statements:

a. By September 1st, the Gaming Control Board prepares a budget request by appropriation unit to be presented to the next legislature.

b. The appropriation request is submitted to the Department of Finance and Administration’s Budget Division (DFA) and to the Legislature.

c. DFA makes recommendations and adjustments to the appropriation request, which become the Governor’s proposal to the Legislature.

d. The Legislative Finance Committee (LFC) holds hearings on the appropriation request, also submitting recommendations and adjustments before presentation to the Legislature.

e. Both the DFA’s and LFC’s recommended appropriation proposals are presented to the Legislature for approval of the final budget plan.

f. Budgetary control is exercised at the appropriation unit level of the Gaming Control Board as a whole and changes are approved by the DFA.

g. Appropriations, if reverting, lapse at the end of the year except for amounts in accounts payable.

h. Beginning with fiscal year 2005, the General Appropriation Act establishes the modified accrual basis of accounting for governmental funds as the budgetary basis of accounting for the State of New Mexico.

6. Prepaid Expenses These amounts represent prepayment of postage, which has benefit to the Board beyond the year ended June 30, 2010. Prepaid expenses are expensed when consumed. Therefore, these items are allocated to the fiscal year in which they are used.



June 30, 2010

-28-


7. Capital Assets Property, plant and equipment purchased or acquired is carried at historical cost or estimated historical cost. Contributed assets are recorded at the fair market values as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. The State’s capitalization policy; i.e., the dollar value above which asset acquisitions are added to the capital accounts, is $5,000 per section 12-6-10 NMSA 1978. For years before fiscal year 2005, the capitalization threshold was $1,000. Computer software which has been developed for internal use and which meets the capitalization minimum of $5,000 is capitalized and depreciated in accordance with the Board’s depreciation guidelines. Depreciation on all assets is provided on the straight-line basis over the estimated useful lives with no salvage value, as follows:

Machinery and equipment 5 to 7 years Gaming machine electronic monitoring equipment and software 5 ½ years Computer hardware and software 5 to 7 years

8. Encumbrances Accounting Encumbrances accounting, under which purchase orders, contracts and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary control in the general fund during the operating year. Encumbrances outstanding that do not extend beyond the appropriation period (generally, the fiscal year ended June 30), lapse and must be re-encumbered against the new appropriation during the following fiscal year, as necessary or needed. 9. Compensated Absences Payable Vacation and sick leave earned and not taken is cumulative; however, upon termination of employment, sick pay for such leave hours accumulated up to 600 hours is forfeited, and vacation pay is limited to payment for 240 hours. Vacation leave up to the maximum of 240 hours is payable upon separation from service at the employee’s current hourly rate. Sick leave is payable semiannually to qualified employees for hours accumulated above 600 hours at a rate equal to 50 percent of their hourly rate, not to exceed 120 hours each semi-annual period. Upon retirement, payment for sick leave is limited to 400 hours accumulated in excess of 600 hours at the 50 percent hourly rate. The compensated absences payable is included in the government-wide financial statements.



June 30, 2010

-29-


10. Due to the State General Fund (Reversion) Reversion to the State General Fund by the Board are based on the definitions of reverting funds. Reverting Funds – All funds that are not identified by law as non-reverting. Such funds are

those in excess of budgeted expenditures and approved encumbrances. Current year reversion due to the State general fund as of June 30, 2010 were: General Fund Budget fiscal year ended: June 30, 2010 $ 406,163

11. Reservations of Fund Balances Reservations of fund balance of the government funds are created to either (1) satisfy legal covenants that require that a portion of the fund balance be segregated, or (2) identify the portion of the fund balance that is not appropriable for future expenditures. Specific reservations of fund balance accounts are summarized below: Reserved for Petty Cash – This reserve was created to represent the portion of fund balance

that is used in petty cash. Reserved for Prepaid Expenses – This reserve was created to represent the portion of fund

balance that is not available for expenditures because the Board expects to use the resources within the next budgetary period.

The unreserved fund balance for the governmental fund represents the amount available for budgeting future operations. There were no net assets restricted by enabling legislation at June 30, 2010. 12. Net Assets The government-wide fund financial statements utilize a net asset presentation. Net assets are categorized as investment in capital assets, restricted and unrestricted.



June 30, 2010

-30-

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 12. Net Assets - Continued Investment in Capital Assets – is intended to reflect the portion of net assets which are

associated with non-liquid, capital assets less outstanding capital asset related debt. The Board did not have any related debt during the year ended June 30, 2010.

Unrestricted Deficit – represents the deficit of total assets over total liabilities and net assets invested in capital assets at June 30, 2010. Restricted Net Assets – net assets should be reported as restricted when constraints placed on net asset use are either: • Externally imposed by creditors (such as through debt covenants), grantors, contributors,

or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation.

• Enabling legislation must be legally enforceable. Legal enforceability means that a

government can be compelled by an external party - such as citizens, public interest groups or the judiciary – to use resources only for the purposes specified by the legislation.

The amount of net assets restricted by enabling legislation is $0 at June 30, 2010. 13. Use of Estimates The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

14. New Accounting Standards Affecting Gaming Control Board GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, provides clearer fund balance type definitions and classification rules for fund balances. This standard will be implemented for fiscal 2011.



June 30, 2010

-31-

NOTE C – INVESTMENTS

1. Investments in State General Fund Investment Pool Investments of the Board consist of its interest in the State general fund investment pool, which is managed by the New Mexico State Treasurer. The fair value of the investments maintained at the New Mexico State Treasurer’s Office at June 30, 2010, is as follows:

Fair ValueInvestment Maturities June 30, 2010

New Mexico State Treasurer's Office general fund investment pool 1 day to 3 years 658,026$

Detailed information of the Board’s interest in the State general fund investment pool is as follows:

SHARE Fair ValueFund Fund No. June 30, 2010

General fund 53600 636,261$ Agency fund 95100 21,765

Total interest in state general fund investment pool 658,026$

There are no outstanding reconciling items in funds 53600 and 95100 at June 30, 2010. The Board is not permitted to have any other investments, and the Board did not have any other investments during the year ended June 30, 2010. 2. Interest Rate Risk The Board does not have an investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. 3. Credit Risk The New Mexico State Treasurer’s investment pools are not rated. For additional GASB 40 disclosure information related to the above investment pool, the reader should refer to the separate audit report of the New Mexico State Treasurer for the fiscal year ended June 30, 2010.



June 30, 2010

-32-

NOTE D – ACCOUNTS RECEIVABLE Applicants for gaming licenses are charged certain fees for both background investigations and for licenses to engage in gaming activities. At June 30, 2010, the Board’s agency fund was owed $8,550 from various gaming entities. All amounts are considered to be collectible.

NOTE E – CAPITAL ASSETS A summary of changes in capital assets is as follows. All assets are depreciable:

Balance at Current Year Current Year BalanceAsset Description June 30, 2009 Additions Deletions June 30, 2010

Machinery and equipment 615,591$ -$ -$ 615,591$ Gaming machine electronic monitoring equipment and software 3,920,372 - - 3,920,372

Total capital assets 4,535,963 - - 4,535,963

Accumulated Depreciation

Machinery and equipment 589,070 11,220 - 600,290 Gaming machine electronic monitoring equipment and software 2,931,583 400,000 - 3,331,583

Total accumulated depreciation 3,520,653 411,220 - 3,931,873

Net Capital Assets 1,015,310$ (411,220)$ -$ 604,090$

Depreciation expense of $411,220 was charged entirely to the regulation function. All capital assets are being depreciated.



June 30, 2010

-33-

NOTE F – CHANGES IN ACCRUED COMPENSATED ABSENCES

A summary of changes in compensated absences payable for the year ended June 30, 2010, is as follows:

235,830$ 185,544$ (203,534)$ 217,840$ 174,083$

Amount Due Within One Year

Balance at June 30,

2009

Balance at June 30,

2010Additions Deletions

Historically, all compensated absences have been paid out of the general fund.

NOTE G – COMMITMENTS

1. Operating Leases The Board leases a building located at 4900 Alameda Boulevard NE, Albuquerque, NM. The lease dated May 1st 2005 has a term of fifteen years, with an option to renew for an additional five years. The lease has an escalation clause of 3.64% over the full-term (including renewal option) of the lease. On October 18, 2010 the lease was amended to temporarily reduce rent in the amount of $1,500 per month for a total savings of $18,000 effective July 1, 2010 and ending June 30, 2011. The Board agreed to reimburse the lessor this amount during the last five years of the lease agreement. A portion of this office space is subject to a sublease with the Racing Commission. Additionally, the Board leases certain other office space, office equipment and vehicles under one-year lease agreements. Vehicles are leased from the General Services Division State of New Mexico. During the year ended June 30, 2010, the Board paid approximately $620,205 under its various lease agreements.

Operating Leases

Future minimum rental payments under noncancellable lease agreements are as follows:

For the years ended June 30,2011 677,010$ 2012 735,155 2013 759,034 2014 783,701 2015 809,180

2016 - 2020 4,172,935

7,937,015$



June 30, 2010

-34-

NOTE G – COMMITMENTS - CONTINUED

1. Operating Leases - Continued

Minimum rentals to be received in the future under noncancellable subleases is as follows: The rental income received is netted against rental expense for financial reporting purposes.

Subleases

For the years ended June 30,2011 84,588$ 2012 89,956 2013 92,466 2014 95,470 2015 98,580

2016 - 2020 508,365

969,425$

2. Computer Software Maintenance Contracts

The Board has a maintenance agreement on its initial gaming machine electronic monitoring software and hardware programs (AGIS). Expenditures inclusive of gross receipts tax for the agreement were $699,008 for the year ended June 30, 2010. In December 2005, the Board entered into a contract for the development, licensing and maintenance of an updated Central Monitoring System. The Advanced Entertainment Gaming Information System (AEGIS) contract includes software licensing, hardware and maintenance of the system as follows:

Software license fee 2,015,111$ Hardware 185,000 Maintenance:6 month period beginning 6months after effective date July 1, 2006 262,500 1st full year (2007-2008) 617,500 2nd full year (2008-2009) 655,000 3rd full year (2009-2010) 655,000 4th full year (2010-2011) 655,000 5th full year (2011-2012) 692,500 6th full year (2012-2013) 692,500 7th full year (2014-2015) 692,500

7,122,611$



June 30, 2010

-35-

NOTE G – COMMITMENTS - CONTINUED

2. Computer Software Maintenance Contracts – Continued

Commitments outstanding at June 30, 2010 are as follows:

Maintenance contract 2,732,500$

NOTE H – RETIREMENT PLAN (STATE PERA)

Plan Description – Substantially all of the Board’s full-time employees participate in a public employee retirement system authorized under the Public Employees Retirement Act (Chapter 10, Article 11, NMSA 1978). The Public Employees Retirement Association (PERA) is the administrator of the plan, which is a cost-sharing multiple-employer defined benefit retirement plan. The plan provides for retirement, disability benefits, survivor benefits and cost-of-living adjustments to plan members and beneficiaries. PERA issues a separate, publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to PERA, P.O. Box 2123, Santa Fe, New Mexico 87504-2123. That report is also available on PERA’s website at www.pera.state.nm.us.

Funding Policy – Plan members are required to contribute 8.92% of their gross salary. The Board is required to contribute 15.09% of the gross covered salary. The contribution requirements of the plan members and the Office are established under Chapter 10, Article 11, NMSA 1978. The requirements may be amended by acts of the legislature. The Board’s employer contributions to PERA for the years ending June 30, 2010, 2009 and 2008 were $462,620, $533,177 and $511,643, respectively, equal to the amount of the required contributions for each year.

NOTE I – POST EMPLOYMENT BENEFITS – STATE RETIREE HEALTH CARE PLAN

Plan Description. The Board contributes to the New Mexico Retiree Health Care Fund, a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the New Mexico Retiree Health Care Authority (RHCA). The RHCA provides health care insurance and prescription drug benefits to retired employees of participating New Mexico government agencies, their spouses, dependents, and surviving spouses and dependents. The RHCA Board was established by the Retiree Health Care Act (Chapter 10, Article 7C, NMSA1978). The Board is responsible for establishing and amending benefit provisions of the healthcare plan and is also authorized to designate optional and/or voluntary benefits like dental, vision, supplemental life insurance, and long-term care policies.



June 30, 2010

-36-

NOTE I – POST EMPLOYMENT BENEFITS – STATE RETIREE HEALTH CARE PLAN – CONTINUED

Eligible retirees are: 1) retirees who make contributions to the fund for at least five years prior to retirement and whose eligible employer during that period of time made contributions as a participant in the RHCA plan on the person’s behalf unless that person retires before the employer’s RHCA effective date, in which event the time period required for employee and employer contributions shall become the period of time between the employer’s effective date and the date of retirement; 2) retirees defined by the Act who retired prior to July 1, 1990; 3) former legislators who served at least two years; and 4) former governing authority members who served at least four years. The RHCA issues a publicly available stand-alone financial report that includes financial statements and required supplementary information for the postemployment healthcare plan. That report and further information can be obtained by writing to the Retiree Health Care Authority at 4308 Carlisle NE, Suite 104, Albuquerque, NM 87107 Funding Policy. The Retiree Health Care Act (Section 10-7C-13 NMSA 1978) authorizes the RHCA Board to establish the monthly premium contributions that retirees are required to pay for healthcare benefits. Each participating retiree pays a monthly premium according to a service based subsidy rate schedule for the medical plus basic life plan plus an additional participation fee of five dollars if the eligible participant retired prior to the employer’s RHCA effective date or is a former legislator or former governing authority member. Former legislators and governing authority members are required to pay 100% of the insurance premium to cover their claims and the administrative expenses of the plan. The monthly premium rate schedule can be obtained from the RHCA or viewed on their website at www.nmrhca.state.nm.us.

The Retiree Health Care Act (Section 10-7C-15 NMSA 1978) is the statutory authority that establishes the required contributions of participating employers and their employees. The statute requires each participating employer to contribute 1.3% of each participating employee’s annual salary; each participating employee is required to contribute .65% of their salary. In the fiscal years ending June 30, 2011 through June 30, 2013 the contribution rates for employees and employers will rise as follows:

Fiscal Year Employer Contributions Rate Employee Contribution Rate FY11 1.666% .833% FY12 1.834% .917% FY13 2.000% 1.000%



June 30, 2010

-37-

NOTE I – POST EMPLOYMENT BENEFITS – STATE RETIREE HEALTH CARE PLAN – CONTINUED

Also, employers joining the program after January 1, 1998, are also required to make a surplus-amount contribution to the RHCA based on one of two formulas at agreed-upon intervals. The RHCA plan is financed on a pay-as-you-go basis. The employer, employee and retiree contributions are required to be remitted to the RHCA on a monthly basis. The statutory requirements for the contributions can be changed by the New Mexico State Legislature. The Board’s contributions to the RHCA for the year ended June 30, 2010, 2009, and 2008 were $37,651, $37,301 and $33,350, respectively, which equal the required contributions for each year.

NOTE J – TRANSFERS TO STATE GENERAL FUND

During the year, the following cash transfers were made from the Board to the State of New Mexico’s general fund:

G.C.B. SHAREFund Fund

Number Number AmountLicenses and fees trust funds - from agency funds 95100 85300 393,529$

General fund reversions FYE June 30, 2010 53600 85300 406,163

799,692$

During the year ended June 30, 2010, the following cash transfers were made from the State of New Mexico’s general fund to the Board:

G.C.B. SHAREFund Fund

Number Number Amount

State general fund appropriations, Laws of 2009, Chapter 28, Section 4 53600 85300 6,275,700$

6,275,700$



June 30, 2010

-38-

NOTE K – INSURANCE COVERAGE

The Gaming Control Board is exposed to various risks of losses related to torts; theft of, or damage to, or destruction of assets; errors and omissions; injuries to employees or others; and natural disasters. Section 15-7-2 NMSA 1978 requires the General Services Department, Risk Management Division (RMD) to be responsible for the acquisition and administration of all insurance purchased by the State. The Board pays premiums to participate in the program. The Board obtains its coverage through the Risk Management Division. This coverage includes liability and civil rights, property, vehicle, employee bond, workers’ compensation, group insurance and state unemployment. These coverages are designed to satisfy the requirements of the State Tort Claims Act. Risk management expenditures for the Board are accounted for in the general fund. Any claims are processed through RMD. All employees of the Board were covered by blanket fidelity bond and money securities coverage by the State of New Mexico for the period July 1, 2009 through June 30, 2010.

NOTE L – SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date, but before financial statements are issued. The Board recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Board’s financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet, but arose after the balance sheet date and before financial statements are available to be issued. The Board has evaluated subsequent events through November 19, 2010, which is the date the financial statements are issued. The following matters were noted. On October 19, 2010 the Board of Finance approved a $177,893 loan for the Board to cover budget shortages in fiscal year 2011. The loan was necessary due to severe budget cuts during the last three fiscal years and was needed in order for the Board to adhere to the 50% budget rule. The loan must be paid back by June 1, 2011. The Board has two legal issues that continue to impact the budget. One is the appeal by La Mesa Park and their attempt to restore their gaming license, and the second includes the various compliance issues with the compacted tribes. The compact issues will likely lead to arbitration and will incur significant costs.

SUPPLEMENTARY INFORMATION

-39-


SCHEDULE OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND-LICENSING AND BACKGROUND FEES

June 30, 2010

Balance BalanceJune 30, 2009 Additions Deletions June 30, 2010

ASSETSInvestments with

State Treasurer 46,050$ 341,429$ (365,714)$ 21,765$ Accounts receivable, net 5,191 31,174 (27,815) 8,550

Total assets 51,241$ 372,603$ (393,529)$ 30,315$

LIABILITIESDue to State general fund 51,241$ 372,603$ (393,529)$ 30,315$

Total liabilities 51,241$ 372,603$ (393,529)$ 30,315$

Agency Fund

-40-


MEMORANDUM OF UNDERSTANDING

June 30, 2010

Participants: Gaming Control Board, Office of the Governor, State Racing Commission, Expo New Mexico Party responsible for operation: Office of the Governor Purpose: To jointly fund a contract between the Office of the Governor and a mutually agreed contractor to assist in gaming issues, including Indian Gaming and the Indian Gaming Contracts. Dates of agreement: July 1, 2009 – June 30, 2010 Total estimated amount of project: $75,000 Amount agency contributed during this fiscal year: $25,000 Audit responsibility: Office of the Governor Fiscal agent: Office of the Governor Agency where revenues/expenditures are reported: Office of the Governor

-41-

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Hector H. Balderas New Mexico State Auditor and David Norvell, Chair State of New Mexico Gaming Control Board Albuquerque, New Mexico We have audited the accompanying financial statements of governmental activities, each major fund, the budgetary comparison of the General Fund and the aggregate remaining fund information of the State of New Mexico Gaming Control Board (Board), as of and for the year ended June 30, 2010, which collectively comprise the Board’s basic financial statements, as listed in the table of contents, and have issued our report thereon dated November 19, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Board’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Board’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Board’s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis.

-42-

Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses, as defined above. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses as described above. Compliance and Other Matters As a part of obtaining reasonable assurance about whether the Board’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, others within the Board, the Office of the State Auditor, the New Mexico Legislature, Department of Finance and Administration, and is not intended to be and should not be used by anyone other than these specified parties.

Atkinson & Co. Ltd.

Albuquerque, New Mexico November 19, 2010

-43-


SCHEDULE OF FINDINGS AND RESPONSES

June 30, 2010

FINANCIAL STATEMENTS Type of auditor’s report issued: Unqualified INTERNAL CONTROL OVER FINANCIAL REPORTING Material weaknesses identified? No Significant deficiencies identified not considered to be material weaknesses? No COMPLIANCE AND OTHER MATTERS Noncompliance material to the financial statements noted? No CURRENT YEAR FINDINGS None STATUS OF PRIOR YEAR FINDINGS

09-01 – ASSET DISPOSAL NOT RECORDED IN A TIMELY MANNER-RESOLVED

-44-


EXIT CONFERENCE

June 30, 2010

The basic financial statements have been prepared by Atkinson & Co., Ltd. with the assistance of The Gaming Control Board. The content in this report is the responsibility of the Gaming Control Board.

* * * * * An Exit Conference was held on November 19, 2010 and attended by the following: For Atkinson & Co., Ltd.: Martin Mathisen, CPA, CGFM Shareholder/Audit Director Morgan Browning, CPA, CGFM Audit Manager For the State of New Mexico Gaming Control Board: David Norvell Board Chair Greg J. Saunders Deputy Director Cynthia M. Ortega-Armijo ASD Director Carla Smith Human Resources

2010 - nmgcb.sks.comnmgcb.sks.com/uploads/filelinks/c3da00ae07fc4a6aa59329988e25bb… · demesia...

Documents