FISCAL NOTE

Date Requested: February 04, 2019
Time Requested: 01:05 PM
Agency: Administration, WV Department of
CBD Number: Version: Bill Number: Resolution Number:
1294 Introduced HB2843
CBD Subject: Finance and Administration


FUND(S):

All State Agencies

Sources of Revenue:

Other Fund Unknown

Legislation creates:

Creates New Program



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.
    
    Federal Program:
    
    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 $5.8 million in property donated from the federal government over the last several years.
    
    Eliminating the WVSASP would require that the State designate a new SASP and develop a new State Plan of Operation. Participation in the Donated Federal Property program requires the SASP to develop a State Plan of Operation that is approved by the federal government and the Legislature. Eliminating the WVSASP would mean that its State Plan of Operation is no longer in effect and the new SASP would need to develop a new State Plan of Operation. Failing to do so means that the State would lose the ability to participate in the Donated Federal Property program. As written, the current law creates a one-year gap in which the new SASP would not have a State Plan of Operation. This means that much, if not all, of the current $1.3 Million in donated property be returned to the federal government. The one-year gap is also problematic because it will delay the roll out of the Veteran Small Business Enhancement Act in West Virginia. That act will allow veterans and veteran owned business to obtain federal property through the program. That program will not be available to WV Veterans until the new State Plan of Operation is in place and approved by the Legislature and the Federal Government.
    
    Similarly, 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. Transfer or disposal of the assets during the compliance periods is prohibited. Any new SASP would need time to staff up to comply with these federal requirements.
    
    Given that these functions are already served by the WVSASP, recreating them elsewhere is not necessary.
    
    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. As more examples of the impact of this program, Donated Federal Property has also been distributed: as snow plows that Division of Highways are currently clearing our state roads; as part of the Small Business Association’s 8A program that helps small and minority businesses in this state.
    
    State Program:
    
    The WVSASP is also the entity responsible for ensuring that used equipment is properly disposed of/retired and selling that property to eligible organizations and the general public. Without the WVSASP oversight, improper disposal would be expected to increase significantly, opening the door to waste, fraud and abuse throughout state government. Additionally, the WVSASP provides a centralized warehouse for sales and expertise on how to dispose of sensitive materials and equipment. Cost attributable to the decentralization the state surplus program to each agency will be significant. There will undoubtedly be duplication of services at each agency, additional hiring to cover the increased workload, and redundant costs including handling, storage, and auctioning of state property.
    
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 1,300,000 0
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 $1.3 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.
    
    Costs attributable to the decentralization of the state surplus program to each agency will also be significant but are hard to determine with a high degree of accuracy. There will undoubtedly be duplication of services at each agency, additional hiring to cover the increased workload, and redundant costs including handling, storage, and auctioning of state property. Unfortunately, the extent of that duplication will vary by agency.
    



Memorandum


    WVSASP is the entity responsible for ensuring that used equipment is properly disposed of/retired. Without 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. 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 (i.e. Highways) was exempt from 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 also 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.
    
    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 WVSASP and through internet-based auctions. For example, various counties and municipalities have purchased vehicles, furniture, and much more.
    
    WVSASP is currently charged with training entities on entering assets into the wvOASIS system for inventory tracking purposes. Without WVSASP, this responsibility would need to be taken on by another entity. wvOASIS does not provide this training.
    
    Every State currently has a state agency for surplus property 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: Samantha Knapp
    Email Address: Samantha.S.Knapp@wv.gov