The joint meeting of the Assembly Committee on Taxation and the Senate Committee on Taxation was called to order at 2:10 p.m., on Thursday, February 11, 1999. Chairman David Goldwater presided in Room 1214 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Mr. David Goldwater, Chairman

Mr. Roy Neighbors, Vice Chairman

Mr. Bernie Anderson

Mr. Greg Brower

Mrs. Vivian Freeman

Ms. Dawn Gibbons

Mr. John Jay Lee

Mr. Mark Manendo

Mr. Harry Mortenson

Mr. Bob Price

Ms. Sandra Tiffany

Mr. Morse Arberry, Jr.

Mr. John Marvel

Senator Mike McGinness, Chairman

Senator Dean A. Rhoads, Vice Chairman

Senator Ann O’Connell

Senator Joe Neal

Senator Bob Coffin

Senator Randolph Townsend

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Prior to opening the formal hearing, Senator McGinness explained he had a request for a committee introduction from Senator Washington (BDR-32-116) relative to clarifying provisions governing administration of exemptions from sales and use tax on food for human consumption. He asked for a motion for said bill request, if that was the intent of the members. The following motion was made:

SENATOR NEAL INTRODUCED A MOTION TO REQUEST A BILL

DRAFT AS STATED BY SENATOR McGINNESS

SENATOR RHODES SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY WITH ALL SENATORS

VOTING IN THE AFFIRMATIVE.

Chairman Goldwater advised the committee members the purpose of the hearing was to review the audit report on the Southern Nevada Water Authority (SNWA). It had been requested as part of A.B. 291 from the 1997 Legislative Session and was recently completed by the Fiscal Division of the Legislative Counsel Bureau. The Audit Report of the Southern Nevada Water Authority 1998 was identified herein as "Exhibit C".

Chairman Goldwater requested staff from the Legislative Counsel Bureau’s Audit Division begin their presentation and introduced Legislative Auditor Gary Crews.

Mr. Crews distributed copies of the audit report to all members and introduced his two staff members. They were Stephen M. Wood, Chief Deputy Legislative Auditor and Mike Spell, Audit Supervisor who was in charge of conducting the work at the SNWA. Mr. Crews gave a brief background on how audit request developed. He pointed out the project began last session when A.B. 291 was passed which included a provision in section 25 to have an audit done of the SNWA with a report back to the Committees on Taxation during session. That was a little different provision inasmuch as, generally, they report back to the Audit Subcommittee of the Legislative Commission.

The Audit Division started its audit in 1997 primarily by conducting a preliminary survey of the operations of the SNWA. Upon completion of that survey, they focused efforts on determining whether the SNWA’s financial and operational information used for making decisions and assessing accountability was valid and reliable. It included an evaluation of the information contained within their budgetary documents, capitol improvement plan, and water management information such as their water budget and their water resources plan.

The audit concluded the information reviewed was sufficiently valid and reliable for purposes of making decisions and assessing accountability. Although much of the information used was based on estimates and forecasts, there was no evidence to suggest SNWA used illogical, unreasonable, or unsound assumptions and methodologies. The information was suitable for the purposes of making decisions by authorities of the Water Authority. Furthermore, the information was substantially complete and accurate enough to allow for accountability in accounting purposes.

Although the auditors found no significant limitations in the information, they had concerns in several areas where they felt control procedures could be enhanced to strengthen financial controls as well as their information management issues.

Mr. Crews pointed out they had concluded with a rather lengthy report and it was their desire to walk through some of the more important areas with the legislators. He added the SNWA was a complex organization at issue and he felt a great many people would benefit from a discussion of the structure and organization of SNWA. He then requested testimony from Mike Spell, Audit Supervisor, who was well versed on water issues and had spent a good portion of a year in Las Vegas.

Mr. Spell took the floor and proceeded through the audit report beginning on page 5 and going through page 16 offering comments and/or emphasizing areas of particular interest. Upon conclusion of his presentation, Mr. Spell turned the floor over to Stephen Wood, Chief Deputy Legislative Auditor.

Mr. Wood began his presentation on the remainder of the report beginning on page 17, explaining it was the "findings and recommendation" section of the report. The first chapter dealt with issues related to budgetary and capital improvements information and, as mentioned earlier, the overall conclusion was the information was both valid and reliable, but improvements were needed. Mr. Wood proceeded through the remaining portions of the audit report, pointing out areas of importance, all of which were spelled out succinctly within the budget report. He concluded his portion of the report and turned the floor back to Mr. Spell.

Mr. Spell continued through the capital project information contained in the audit report, beginning on page 30. He pointed out findings indicated the accuracy of facilities planning information could be improved and, as he had previously discussed, ongoing improvements to the SNWA projects were projected to cost $2 billion dollars by the year 2017. The report outlined suggestions for improvements to the recordkeeping and reporting procedures. All suggestions were spelled out in detail in the written, submitted report.

In concluding his oral report in the "findings section", on page 48, Mr. Spell called the members attention to recommendations from his staff adding he would not go through them at that time. He emphasized there were six recommendations in the report, all related to the need to establish and improve procedures for the budget process, budget monitoring, and process for collecting water information in a review process.

He brought to the attention of the committee a number of appendices in the report, which described the creation of the authority, its relationship with the Las Vegas Valley Water District on the law of the river, rate and connection charge information, etcetera. The key appendix was designated as "N" on page 77, which was the response from the Southern Nevada Water Authority. In general that entity was in agreement with the report and found it to be a fair and accurate review. Mr. Spell indicated the Southern Nevada Water Authority had accepted all six of the auditors’ recommendations. He expressed his appreciation for the opportunity to make the presentation and volunteered to answer questions.

Chairman Goldwater thanked Mr. Spell and his staff for their excellent service in compiling that information, acknowledging the amount of time and effort to create that document.

Chairman Goldwater recognized Assemblyman Anderson who did have a question. Mr. Anderson explained, after listening to the testimony, he wanted to make certain he understood the information as presented. He asked if the auditors saw the deficiencies as a standard lack of accounting practice or if they felt their accounting practice was adequate. Had there been any concerns with a lack of familiarity by the SNWA with the audit demands of their office. Mr. Crews, responded by pointing out the SNWA hired an outside auditor to conduct the financial audit. Therefore, the audit report did not delve into detail or into other issues in the budgetary process.

Mr. Crews stated most of the deficient issues dealt with a lack of adequate guidance. The work was basically done reasonably well, but could be strengthened in many areas where they saw room for improvement. His agency’s concern was that some time down the road something may slip through the cracks which could have a very significant impact to their long-range planning, water resource usage and so on. There was definitely a need for strengthening their audit system.

Pursuing his line of questioning, Mr. Anderson called attention to page 42 wherein the staff talked about the conservation issue. It appeared to him that the SNWA saw one of the solutions to conservation to be a demand for a price increase in water. He asked if that was a fair estimation of what was seen as their conservation element; by raising the per-unit-cost of the resource would necessitate, on the other end, a lessening of demand without regard to the population increase.

Responding to Mr. Anderson’s question, Mr. Wood stated he felt that was an accurate portrayal of the information they had received and was presented in the report. The formula was taken directly from the Water Resources Plan which, he believed, was their intention and suggested perhaps the Water Authority could explain a little further. However, as stated in their water resource plan the conservation measures and affects of water price increases would play a significant role in southern Nevada being able to meet its water demands well into the future.

Chairman Goldwater recognized a comment from Senator O’Connell who wished to congratulate the Legislative Counsel Audit staff for the exemplary job they did on the audit and wanted to publicly express her appreciation for the information provided. Joining Senator O’Connell in expressing appreciation to the auditing staff was Chairman Goldwater and Chairman McGinness who both echoed the sentiment of Senator O’Connell. Senator McGinness stated, as a small business owner, he would like to have been able to operate with so few problems as presented. He also acknowledged the preparation of the document presented by Mr. Crews and his staff and recognized the fact the Southern Nevada Water Authority had been taking care of business as well.

There were no further questions or comments from any member of the committee, whereupon Chairman Goldwater indicated he would entertain a motion to accept the audit report recognizing it as an official document.

SENATOR O’CONNELL MOVED TO ACCEPT THE AUDIT REPORT

ON THE SOUTHERN NEVADA WATER AUTHORITY AS PRESENTED

BY THE LEGISLATIVE COUNSEL BUREAU AUDITORS.

ASSEMBLYMAN ANDERSON SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

Chairman Goldwater asked if there were questions or testimony from anyone in the audience or, inasmuch as the hearing was being teleconferenced to the Grant Sawyer Office Building in Las Vegas, if there were any questions from southern Nevada. There being none, the hearing was closed.

There being no further business to come before the committee the meeting was adjourned at 3:00 p.m.

RESPECTFULLY SUBMITTED,

___________________________

Nykki Kinsley

Committee Secretary

APPROVED BY:

Assemblyman David Goldwater, Senator Mike McGinness, Chairman Chairman

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