FISCAL NOTE

Date Requested: March 08, 2017
Time Requested: 12:47 PM
Agency: Administration, WV Department of
CBD Number: Version: Bill Number: Resolution Number:
2378 Introduced HB2819
CBD Subject: Finance and Administration, Real and Personal Property


FUND(S):



Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The impact of this bill will be catastrophic to state agencies and eligible organizations. This program administers the state and federal surplus property programs. The federal government administers a program that donates millions of dollars of used equipment to state agencies and eligible organizations through its General Services Administration. Eligible Organizations include counties, cities, and other non-profit organizations. To participate in the federal donated property program, each State is required to designate a State Agency for Surplus Property (“SASP”) that coordinates the donation efforts. The West Virginia State Agency for Surplus Property (“WVSASP”) is the designated entity in West Virginia. State and eligible organizations have received over $4.5 million in property donated from the federal government in the last two years alone. Eliminating the WVSASP would require that the State either designate a new SASP or much, if not all, of this $4.5 million in donated property be returned to the federal government. As an example of the impact of this program, WVSASP was instrumental during the devastating floods in 2016 by obtaining donated federal property to assist in the flood relief efforts. A total of 84 generators were obtained for the National Guard to use in flood relief and the flood recovery resource center in Quincy was stocked with surplus property at no cost. This would not have been possible with a decentralized surplus system. Participation in the Donated Federal Property program requires the WVSASP to develop a State Plan of Operation that is approved by the federal government and the Legislature. The WVSASP has developed a State Plan of Operation specific to the WVSASP, which was recently approved by the Federal Government and the Legislature as legislative rules. Eliminating the WVSASP would mean that either another agency would need to develop a new State Plan of Operation or the State would lose the ability to participate in the Donated Federal Property program. Participation in the Donated Federal Property program requires the WVSASP to conduct compliance audits and reporting to the Federal Government. Failure to conduct these compliance audits and reports would require a return of the donated equipment and could lead to liability on the part of the State agency holding the equipment for failure to comply. Compliance generally means that equipment donated by the federal government must be placed in service within 12 months of receipt and must be maintained as an operational state asset for at least 18 months. Transfer or disposal of the assets during the compliance periods is prohibited. As more examples of the impact of this program, Donated Federal Property has also been distributed: o As snow plows that Division of Highways are currently clearing our state roads; o As equipment and storage solutions to a local foodbank to feed the hungry; o As a Humvee to an ambulance authority to allow life-saving transport in inclement weather; and o As part of the Small Business Association’s 8A program that helps small and minority businesses in this state.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 4,500,000 4,500,000 450,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


In regard to the long-range fiscal effect, the $4.5 million noted is based on the loss of existing equipment through the Federal Donated Property program. Costs will be significantly higher due to the inability to obtain Federal Donated Property in the future. By decentralizing this valuable program to each agency, the duplication of services resulting in increased costs to the state will be realized. Although the exact amount of increase is undetermined, such services that will be redundant include handling, storage, and auctioning of property. Additionally, staffing will be required at the agency level to handle the Surplus Property Program. The amount to cover the personnel services (salary and benefits) at every entity is undetermined but is expected to be costly. Without the WVSASP oversight, waste, fraud and abuse of state assets and improper disposal would be expected to increase significantly.



Memorandum


The WVSASP is the entity responsible for ensuring that used equipment is properly disposed of/retired. Without the WVSASP oversight, improper disposal would be expected to increase significantly, opening the door to waste, fraud and abuse throughout state government. WVSASP utilizes its access to the inventory system along with its retirement/disposal responsibilities to ensure that agencies properly dispose of equipment. This is a significant theft deterrent as agency personnel know that they will eventually need to remove an item from inventory and be required to explain that removal to WVSASP. Recent indictments and convictions have involved improper disposal of assets and illustrates the need for robust controls relating to retirement/disposal of used equipment. The WVSASP provides those controls. For example, two individuals plead guilty in a scheme involving the improper sale of a dump truck and a third was indicted for allegedly scrapping valuable metal plates. In both cases, the agency (DOH) was exempt from the WVSASP. WVSASP has the expertise necessary to determine the appropriate disposal method for a multitude of sensitive items that cannot be simply thrown away. In some instances, coordination with other government entities or third parties is required. Those items include firearms, x-ray machines, livestock, aircraft, electronic equipment, and much more. Failure to properly dispose of sensitive items could generate significant liability for the State. The radioactive material in x-ray machines, for example, could pose a public health hazard if not properly handled. Most agencies lack the expertise necessary to handle this type of sensitive disposal. Centralized Retirement/Disposal Authority provides a central location for buyers to obtain surplus property. A centralized approach to asset disposal leads to greater awareness of items for sale, increased competition, and maximization of sale prices. If buyers had to monitor each individual agency for items being retired, the effort required would be substantial and would dissuade many buyers from continuing to purchase. This would apply to all items for sale including vehicles. The WVSASP has the ability to sell goods through its central warehouse, to conduct internet based auctions, and to sell larger items that do not transport easily on site. This varied approach to sales maximizes the State’s ability to recover the residual value that these retired assets may retain. Many Eligible Organizations benefit from retired state equipment sold through the central warehouse run by the WVSASP and through internet based auctions. For example: various counties and municipalities have purchased vehicles, furniture, and much more. The WVSASP is currently charged with training entities on entering assets into the wvOASIS system for inventory tracking purposes. Without the WVSASP, this responsibility would need to be taken on by another entity. wvOASIS does not provide this training. Every State currently has a SASP that performs services nearly identical to those performed by the WVSASP. The WVSASP is self-supporting and receives no appropriated general revenue funds.



    Person submitting Fiscal Note: Jennelle H. Jones
    Email Address: jennelle.h.jones@wv.gov