INTRODUCTION TO
CAPITAL OUTLAY
Presented by:
Rebecca Martinez COB Bureau Chief
Barbara Romero COB Coordinator
WHAT IS CAPITAL OUTLAY?
Capital Outlay is funding intended for the acquisition, improvement,
alteration or reconstruction of assets for long term use, including
land, buildings, equipment, furnishings, and vehicles, code
compliance, ADA compliance improvements.
Capital Outlay funds cannot be used for operating expenses, salaries,
supplies, events, brochures, retroactive reimbursements of previous
payments, loan payments or for a private non governmental entity.
W H E R E D O C A P I TA L F U N D S
C O M E F RO M ?
The funds are derived from bonds which are essentially loans the state acquires
with various revenues pledged by the state to make the loan payments.
Payments made in cash or cash equivalents over a period of 7 to 10 years used
to acquire assets or improve the useful life of existing assets. The expenditure
is recognized on a balance sheet gradually over the course of an asset's useful
life.
*Capital Outlay grants smaller than $5000 are not economically feasible when
you consider paperwork, personnel time and loan requirements factored into
the cost.
WHAT ARE OUR SOURCES?
Severance Tax Bonds
 Funds are derived from
royalties paid by companies that
severe a natural resource from
the earth such as oil, gas. timber,
mineral products like copper,
gypsum, pumice
 Use of the funds are subject
to the State Board of Finance
Bond Project Disbursement Rule
NMSA 2.61.6.1
General Obligation Bonds
 Is a municipal bond in which
the issuing locality pledges to use
all revenues at its disposal to pay
bondholders, including the
raising of property taxes.
 Use of the funds are subject
to the State Board of Finance
Bond Project Disbursement Rule
NMSA 2.61.6.1
SOURCES
CONTINUED………………………
 STB's are used to finance statewide Capital projects and usual issued in
Spring following the Legislative Session to fund projects that have been
authorized by the legislature and approved by the Governor.
 GOB are a primary source of funds for capital outlay projects
statewide. In even numbered years, the New Mexico Legislature
authorizes GOB to be voted on in public referendum at the subsequent
November Election. GOB that are approved by a majority vote are issued
by the NM State Board of Finance.
CRITICAL NEED
 Defined as, “critical activities which address an urgent need or emergency situation that
immediately endangers occupants of the premises or creates a serious threat to the health and /
or safety of citizens.”

Situations in which immediate action is necessary;

The situation would disrupt a senior center from operating or failure is
imminent if not corrected in a timely manner;

The threat can be supported by a subject matter expert;

The situation was not a direct cause of poor maintenance or neglect and steps
were taken to prevent, alleviate and or correct the situation; and

The resources required to correct the situation were unavailable.
USEFUL LIFE?
Useful life is defined as, “The expected period of time during which a
depreciating asset will be productive.”
The state has determined that the useful life is estimated between 7 to
10 years.
CAPITAL OUTLAY REFORM
Executive Order 2013-006 – effective May 2, 2013
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Compliance with the audit act
Grantee has sound fiscal practices
Ensure no unconstitutional outcomes
Protect Public funds
Meet bond obligation requirements
Uniform grant management practices
New Mexico State Auditor Rule 2.2.2 NMAC
EXECUTIVE ORDER 2013-006
 Executive Order 2013-006
On May 2, 2013, Governor Susana Martinez signed the EO requiring
recipients of State capital outlay appropriations to have adequate
accounting methods and procedures in place to safeguard capital
outlay funds and assets acquired with the funding. This should
provide for better oversight and management of the State capital
outlay appropriations.
R E V I E W O F C U R R E N T AU D I T
( O R AU P AG R E E D U P O N P RO C E D U R E S )
Acceptable
Unacceptable
Unqualified – concludes
 Qualified - When the auditor, having obtained
Unmodified – concludes
 Disclaimer – The auditor disclaims an opinion
that the financial statements of a
given entity are presented fairly, in
all material respects, in accordance
with GAAP
that the financial statements of a
given entity are presented fairly, in
all material respects, in accordance
with GAAP
enough good audit evidence, or is unable to obtain enough
good audit evidence upon which to base an opinion, and
concludes that misstatements are material to the financial
statement or possible effect on the financial statements of
undetected misstatements if any could be material but are
confined to specific elements, accounts, or items on the
financial statement
when he or she is unable to obtain enough good audit
evidence to base an opinion on, and concludes that
the possible effects of undetected misstatements on
the financial statements could be both material and
pervasive
 Adverse - Expressed when, after having
obtained enough good audit evidence, the auditor
concludes that misstatements, individually or when
grouped with other misstatements, are both material
and affect multiple elements, accounts, or items of
the financial statements.
SOUND FISCAL PRACTICES

means the aggregate set of practices and procedures which allow for the accurate,
transparent, and effective handling of all government monies and government contracts.
•
A coherent set of accounting procedures and standards which reveal that public
monies were spent in accordance with due authority, that all transactions were recorded
accurately, and that a complete audit trail exists to facilitate a post expenditure review
•
Transparent budget mechanisms for the allocation of monies to various expenditure
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A decision making and approval system which limits the span of influence exercised
by any individual official over a particular spending program
•
A set of performance indicators associated with all expenditures, so the effectiveness
in meeting declared targets can be measured.
UNCONSTITUTIONAL OUTCOMES
“A N T I - D O N AT I O N C L AU S E ”
 Article IX, Section 14’s general prohibition: “Neither the state nor any
county, school district or municipality, except as otherwise provided in this
constitution, shall directly or indirectly lend or pledge its credit or make any
donation to or in aid of any person, association or public or private
corporation or in aid of any private enterprise
 Section 6-5-6(C) NMSA 1978 requires all state agency expenditures to be:
for a public benefit and purpose consistent with the related appropriation; and
necessary to carry out the statutory mission of the state agency.
PROTECT PUBLIC FUNDS
 State has spent over 8 billion on capital outlay.
 Some projects were only partially funded and left unusable
 Some projects never were completed and the funds reverted
 Some funds have been mismanaged and not used for the intended
purpose
 States bond rating has been affected
O B L I G AT I O N B O N D R E Q U I R E M E N T S
General Obligation – 5% expended within 6 months of the bond sale
85% expended within 18 months of bond sale
Severance Tax Bond - 5% expended within 6 months of bond sale
85% expended with 3 years of bond sale
U N I F O R M G R A N T M A N AG E M E N T
 Ensure grants have provisions to terminate the grant
 No provisions to prevent grantees from entering into third party
obligations
 No provisions to submit expenditures within quarter
Now the grants provide for more language to better track and control
binding written agreements, better expenditure requirements, termination
clause
CHANGES TO APPLICATION
 Only projects that are critical in nature will be considered
 Plan and design projects must be submitted during the STB cycle
 Justification for the critical need must be well documented through
a project assessment process and supporting documentation
 Use of the new Senior Facility ICIP database is required
 Past performance of grants management will be evaluated
2 0 1 6 P RO P O S E D C A P I TA L
O U T L AY R E QU E S T
Priority
Project Type
Amount Request
Project Rank
1
Code Compliance/Renovation
$ 1,684,150
>65
2
Vehicles
$ 3,421,400
>65
3
Meals Equipment/Other Equipment
$ 911,550
>65
4
Other Renovation
$ 1,504,700
>65
5
New Construction / Major Addition
$ 16,123,700
>65
Totals
$ 23,699,500
2016 LEGISLATIVE SESSION
Session Dates
 January 19 Opening day (noon)
 February 3 Deadline for introduction
 February 18 Session ends (noon)
 March 9 Legislation not acted upon by governor is pocket
vetoed
 May 18 Effective date of legislation not a general
appropriation bill or a
 bill carrying an emergency clause or other specified date
QUESTIONS??????
Contact info:
Rebecca Martinez, Capital Outlay Bureau Chief 505-476-4768
Barbara J, Romero, Capital Outlay Coordinator 505-476-4704
Mary Chavez, Capital Outlay Administrative Asst. 505-476-4879