text:
June 21 , 1984
Members of the Arizona Legisl ature
The Honorable Bruce Babbitt, Governor
Mr. John H. J e t t , Director
Department of Mineral Resources
Transmitted herewith i s a report of the Auditor General, A Performance
Audit of the Department of M i ~ e r a l Resources. This report i s i n response
t o an A p r i l 27, 1983, resolution of the J o i n t Legislative Oversight
Committee. The performance audit was conducted as a p a r t o f the Sunset
Review set f o r t h i n A. R. S. § § 41- 2351 through 41- 2379.
This performance a u d i t r e p o r t i s submitted t o the Arizona State
Legislature f o r use i n determining whether t o continue the Department of
Mineral Resources beyond i t s scheduled termination date of July 1, 1986.
The report addresses the effectiveness of the Department i n meeting i t s
objectives, the adequacy o f agency management, the condition o f the
Mineral Resources Buil ding, and operational improve~ ents needed i n the
Department's data gathering function.
My s t a f f and I w i l l be pleased t o discuss or c l a r i f y items i n the report.
Respectful ly submitted,
1 u
Douglas R. Norton
Auditor General
S t a f f : William Thomson
Peter N. Francis
Brent L. Nel son
Kenneth Eauer
Kimberly S. Hi1 debrand
Encl osure
The Office o f the Auditor General has conducted a performance audit o f the
Department of Mineral Resources i n response t o an A p r i l 27, 1983,
resol ution o f the J o i n t L e g i s l a t i v e Oversight Commi ttee. This performance
audit was conducted as p a r t o f the Sunset Review set f o r t h i n Arizona
Revised Statutes § § 41- 2351 through 41 - 2379.
The Department o f Mineral Resources was created i n 1939 through e f f o r t s o f
the Arizona Small Mine Operators Association ( ASMOA). ASMOA was concerned
about the decreasing number o f small mines i n the state and f e l t an agency
was needed t o help the small mine operators define and overcome problems
i n h i b i t i n g mineral production. Currently, there are approximately 90
active, producing mines i n Arizona.
The Department's stated purpose i s t o a i d i n the promotion, development
and conservation o f Arizona's mineral resources. The agency's a c t i v i t i e s
i n c l ude: 1 ) provi d i ng technical and other assistance t o prospectors, mine
operators and the general public, 2) maintaining information on past and
present mining a c t i v i t i e s , 3) operating a mineral museum, 4) pub1 ishing
directories, information c i r c u l a r s and other reports, and 5) conducting
conferences and seminars. The Department has an authorized s t a f f level o f
11.5 f u l l - time equivalent employees and receives i t s funding from the
State General Fund.
The Department of blineral Resources Has
Not Provided an E f f e c t i v e Flineral Devel o~ ment
Program Due to Poor Management ( see page 9)
The Department's effectiveness i n promoting the development of Arizona's
mineral resources i s questionable. The agency cannot demonstrate what
impact, if any, it has had on mineral development. The Department was
unable t o provide us with information regarding the number o f mining
operations established or jobs created i n the past 4 years as a r e s u l t o f
i t s a c t i v i t i e s . I n addition, the Department could not i d e n t i f y any mining
operation l i s t e d i n i t s Directory o f Active Mines i n Arizona t h a t
began or increased mineral production due t o Departmentassi stance. DMR
compiled s i x case h i s t o r i e s f o r us t h a t it believes represents e f f e c t i v e
mi neral devel opment assi stance provided by the Department. However, upon
v e r i f y i n g the cases, we found t h a t none o f the instances resulted i n new
mineral production w i t h i n the state. The agency has also f a i l e d t o
adequately comply with several s t a t u t o r y mandates d i r e c t l y re1 ated t o i t s
purpose. These mandates include: 1) making mineral resource surveys, 2)
serving as a bureau o f mining information, and 3) cooperating w i t h the
State Land Department t o encourage mining on state lands. Moreover,
i n t e r n a l l y planned goal s and a c t i v i t i e s t h a t could have benefited mineral
development have not been accomplished.
The agency has been i n e f f e c t i v e and i n e f f i c i e n t due t o poor management.
The agency has f a i l e d t o adequately plan i t s a c t i v i t i e s and personnel have
not been given s u f f i c e n t direction. Moreover, the Department 1 acks proper
reporting and control systems t o ensure t h a t agency goals are accomplished.
The Department Needs Better
Physical F a c i l i t i e s ( see page 25)
The Department's f a c i l i t i e s - located a t the Coliseum and State
Fairgrounds since 1947 - are s t e a d i l y deteriorating, posing p o t e n t i a l
safety problems and causing damage t o the contents o f the building. Among
other things, the b u i l d i n g ' s e l e c t r i c a l system i s a d e f i n i t e f i r e hazard,
plumbing and cooling systems need replacement, and missing f l o o r t i l e i s a
possi bl e hazard t o s t a f f and v i s i t o r s . Because 1 i ttl e maintenance has
been provided by e i t h e r the Department or the Arizona Coliseum and
Exposition Center Commission s t a f f f o r t h e p a s t 30 years, the cost to
renovate current f a c i l i t i e s has been estimated by the Facil i t i e s P l anning
Division of the Department o f Admini s t r a t i o n t o be $ 425,000. Therefore,
it would appear t o be more feasible t o relocate the Department.
The Departrrrent could be relocated with o r without i t s mineral museum.
E i t h e r a1 t e r n a t i ve would increase needed appropriations because the agency
has paid no r e n t since 1950 on i t s 11,050- square- foot f a c i l i t i e s . The
mineral museum, which the Department i n h e r i t e d when it moved i n t o the
Gineral Building, occupies most of this space. The mineral museum i s not
essential t o the Department's main purpose. The Departn; entls statutes do
n o t authorize a mineral museum,* rather, the Board of Regents i s
specifically authorized t o maintain such a museum, and the educational and
tourist attraction role of the museum does not relate to the Bepartment's
scope or purpose. In addition, similar agencies in other states do not
have mineral museums. Another state agency such as the Board of Regents
or the Central Arizona lfluseum coul d administer the mineral museum.
Operational Improvements are Needed
In the De~ artment's Infonmtion
The Department has not developed an effective system for gathering and
storing mining information. A1 though infomation on past mining activity
and mineral occurrences w i t h i n the state is a potentially valuable
resource, Department fi1 es are incomplete and inconsistent. This
condition has been caused by: 1 ) the lack of standard procedures for
creating f i l e s and maintaining information, 2 ) unplanned and incomplete
data gathering, and 3) 1 ack of personnel resource comnittments. In
addition, field visits to mining sites by Department staff to g a i n
information are unorganized and unproductive. This results i n i nefficient
use of resources w i t h very l i t t l e information being acquired during the
visits. Moreover, the Department's books and maps have not been
inventoried or catal oged and thi s reduces their potential reference and
research val ue.
* Senate Bill 1048, passed after the end of our audit fieldwork, now
authorizes the Department t o maintain a mineral auseum.
. Page
Department effectiveness has been l i m i t e d . . . . . . . . . . . . 9
Department management has been poor . . . . . . . . . . . . . . . 19
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . 22
Mineral museum building i s d e t e r i o r a t i n g because o f inadequate maintenance . . . . . . . . . . . . . . . . 25
The Department could relocate with the museum . . . . . . . . . . 29
The Department could r e l o c a t e w i t h o u t the museum . . . . . . . . . 31
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . 34
The Department does not properly gather and maintain information f o r mine f i l e s. . . . . . . . . . . . . . . . . . . . 37
F i e l d v i s i t s are unorganized and unproductive . . . . . . . . . . 39
Data repository i s poorly managed . . . . . . . . . . . . . . . . 41
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . 42
OTHER PERTINENT INFORt~ lATION. . . . . . . . . . . . . . . . . . . . . 45
TABLE OF CONTENTS ( Concl ' d)
APPElNeDgIXi sIl a: t i oRne c. en. t c. ha. ng. es. t. o. D. ep. ar. tm. en. t's. e. na. b. l in. g. . . . . . . . . 1- 1
APPENDIX 11: Assistance provided by Department
duringa6- week period. . . . . . . . . . . . . . . . . . . . . . 11- 1
- Page
TABLE 1 - Department Expenditures ( Actual or Approved)
Fiscal Years 1979- 80 Through 1983- 84 . . . . . . . . . . 3
TABLE 2 - Estimate of Cost to Renovate the Mineral Building. . . . 28
TABLE 3 - Estimated Leasing Costs for Commerical Facilities . . . 31
TABLE 4 - Information Gathered on Mine and Field Visits. . . . . . 41
TABLE 5 - Agencies in Other States Administering Programs
Similar to Four Independent Arizona Agencies . . . . . . 48
The Office of the Auditor General has conducted a perforrriance audit of the
Department of blineral Resources ( DII1R) i n response to an April 27, 1983
resolution of the Joint Legislative Oversight Comni ttee. This performance
audit was conducted as part of the Sunset Review set forth in Arizona
Revised Statutes ( A. R. S. ) SS41- 2351 through 41 - 2379.
The Department was created in 1939 through efforts of the Arizona Small
Mine Cperators Association ( ASNOA) . ASMOA was concerned about the
decreasing nu~ ber of small nines i n the state and f e l t an agency was
needed to help the small mine operators define and overcome problems
inhibiting mineral production.
Statutory Cuties - The Departrxent's enabl ing 1 egis1 ation established a
number of statutory duties. Until the recent 1984 Legislative Session,
i t s statutory duties have not changed since i t was created.* These duties
i ncl ude the foll owi ng:
1. aiding in the promotion and development of mineral resources i n
2. conducting studies related to the problems of small mining
operations ;
3. discovering sources of supply for mineral buyers;
4. 1 isting and describing avail abl e mining properties;
5. making mineral resource surveys and conducting other
investigations to interest investors in developing the s t a t e ' s
mineral resources;
6. serving as a bureau of mining information; and
7. pub1 ishing and disseminating mining infomation.
* Following our audit, the Department's statutory duties were modified
by Senate Pill 1048, which i s included as Appendix I.
Currently, DI4R acconpl i shes these duties by: 1 ) operating a mineral
museum, 2 ) providing personal assistance to miners, 3) pub1 i s h i n g
directories, information circulars and other reports, 4) maintaining a
data repository, and 5) conducting conferences and seminars.
A1 though the Department has emptlasized providing assistance to small mine
operators, the number of active, producing mines i n Arizona has decreased
dramatically since DBiR was established. The state had 578 producing nines
i n 1933. An increase i n go1 d prices caused the nu~ ber of producing mines
to r i s e to a peal< of 2,101 i n 1935. However, the number of active mines
had decreased to 1 , I 18 when the Department was establ ished i n 1939. The
number of producing mines has decreased even more since then. Currently,
there are approximately 90 producing mines i n Arizona. T h i s change i n the
nurriber of producing nines can be attributed to changes in the nining
industry, including prohibitive capital requirements and the absence of
high grade ore that can profitably be mined by a small operation.
Approxilliatel y 90 percent of Arizona ' s total mineral production comes from
1 arger mines.
Plineral Nuseum - The DIIR mineral museum is located w i t h the Department's
Phoenix office. The museum occupies most of the space i n the Mineral
Building and includes a large collection of Arizona minerals. The
Department says the museum has 10,000 mineral speci~ ens and only 3,000 are
displayed a t any one time. Flineral specimens and other display items have
been donated to the coll ection by individual s, nining companies, earth
science clubs and other organizations. The items on display include
metal - beari ng mineral s, industrial mineral s, petrified wood, and gemstone
and 1 apidary exhibits. Kiscel 1 aneous displ ays include ceneral rock types,
a special turquoise exhibit, ~ i n e model s, nining equipment and
meteorites. The Department estimates the value of i t s collection to be
between $ 750,000 and $ 3,000,000. In addition, the museum displays
exhibits 1 oaned by others.
Location, Staff and Budget - DNR's main office is located in the Pinera1
Building a t the Arizona State Fairgrounds. Originally, PER was located i n
downtown Phoenix, The Department moved to its present location in 1947.
Within 5 years of the Department's inception field offices were
established i n Globe, Kingman, Prescott, and Tucson. Today, only the
Tucson field office remains open.
Department s t a f f consists of 11 full - time empl oyees and one ha1 f- time
employee. They are the director, four mining engineers, four
administrative and clerical employees, a mineral resource special i s t , a
museum curator, and a maintenance person. A five- person Board of
Governors appointed by the Governor i s charged w i t h making policy
decisions for the Department. The Board a1 so appoints the Department
di rector.
The Department's expenditures for fiscal years 1979- 80 through 1983- 84 are
shown i n Table 1. The agency is funded by appropriations from the State
General Fund.
Actual Actual Actual Actual Approved
1979- 80 1 980- 81 1981 - 82 1 982- 83 1983- 84
Full - time empl oyees 13
Expenditures :
Personal services $ 21 8,700
Empl oyee- re1 ated 40,100
Professional services 0
Travel :
In- state 11,000
Out- of- state 1,300
Other Operating 19,700
Equipment 5,400
Total Expenditures $ 296.200 $ 337.200 $ 364,000 $ 342.800 $ 359.300
Scope of Audit
Our audit of the Department of Mineral Resources addressed issues set
forth i n the 11 Sunset Factors i n A. R. S. 541- 2354. Additional detailed
work was conducted on the following issues:
e whether the Department is operating i n an efficient and effective
e whether the mineral museum i s neccessary t o f u l f i l l the purposes
of the Department;
e if the location and physical condition of the DMR's f a c i l i t i e s are
whether there i s a need for the Department's data repository and
i f so, coul d the information- gathering function be more efficient
and effective.
The Department's Board of Governors was not included within the scope of
our review and we conducted no detailed audit work concerning the Board's
In accordance w i t h Arizona Revised Statutes $ 41 - 2354, the Legislature
should consider the following 11 factors i n determining whether the
Department of Mineral Resources ( DMR) should be continued or terminated.
1. Objective and purpose i n establishing the Agency
According to the Department, i t s primary purpose i s ". . . to aid in
the promotion, development and conservation of the mineral resources
of the state."
To f u l f i l l this purpose the Department currently performs the
following activities:
provides technical and other assistance as requested from
prospectors, mine operators and the general public;
collects information on past and present mining activities i n the
state and maintains a reference library of books and maps;
0 operates a mineral museum;
o pub1 i shes directories, information ci rcul ars, book1 ets and
reports; and
e conducts conferences and seminars.
2. The effectiveness w i t h which the Agency has met i t s objective and
purpose and the efficiency with which the Agency has operated
The Department has not operated effectively or efficiently. I t s
impact on the mineral industry cannot be demonstrated and i t has
failed t o perform some statutory duties directly related to mineral
development ( see page 9). In addition, several significant,
internal ly establ i shed goal s and acti vi ties have n o t been compl eted
( see page 16). The Department's resources have not been used
efficiently because of inadequate pl anni ng and poor personnel
management ( see page 19). Floreover, the Department lacks effective
reporting and control systems t o ensure t h a t employees' time i s spent
e f f i c i e n t l y and t h a t agency goal s and objectives are accompl i shed ( see
page 21 1.
The DMR has not developed an e f f e c t i v e , e f f i c i e n t system f o r gathering
and storing information. It does not adequately gather data f o r i t s
mine f i l e s and does n o t s t o r e t h e information properly ( see page 37).
The present system f o r mine v i s i t s i s unorganized and unproductive
( see page 39). F i n a l l y , the maps and books i n the Department's data
repository are not inventoried or cataloged ( see page 41 1.
3. The extent t o which the Agency has operated w i t h i n the public i n t e r e s t
If the function i s performed e f f e c t i v e l y and e f f i c i e n t l y , it i s w i t h i n
the publ i c i n t e r e s t to encourage prospecting, expl oration, development
and production o f Arizona's mineral resources.
4. The extent t o which rules and regulations promulgated by the Agency
are consistent with the 1 egi sl a t i ve mandate
The Department does not have authority t o promulgate rules and
regulations. The Department's Board o f Governors i s charged to adopt
rules and regulations for government of the Department, but has not
formal l y adopted any r u l es or regul ations.
The extent t o which the Agency has encouraged input from the public
before promulgating i t s rules and regulations and the extent to which
it has informed the public as to i t s actions and t h e i r expected impact
on the publ i c
Neither the Department nor i t s Board o f Governors has promulgated any
rules or regulations.
6. The extent to which the Agency has been able to investigate and
resolve com~ al ints which are within i t s . iuri sdiction
This factor does not apply, as the Department has no regulatory
7. The extent to which the Attorney General or any other applicable
agency of State Government has the authority to prosecute actions
under enabl i ng 1 egi sl ati on
This factor does not apply, as the Department has no regulatory
8. The extent to which the Aaencv has addressed deficiencies in the
enabling statutes which prevent i t from fulfilling i t s statutory
The Department's original enabl i n g statutes have remained unchanged
u n t i 1 recently. During the 1984 regul ar Legi sl ati ve Session the
Department submitted proposed changes to i t s enabl i ng 1 egi sl ation.
After the end of our audit fieldwork these changes were passed as
Senate Bill 1048, which includes the following:
o Changes the Department's name to the " Department of Mines and
Fli neral Resources. "
0 Deletes the two statutory duties to " assist in discovering sources
of supply for persons desiring to buy minerals" and " l i s t and
describe avai 1 able mining properties. "
Gives the DMR specific authority to:
- maintain the mineral museum
- participate i n conferences and seminars
- monitor mining and exploration activities
- investigate properties of small mine operators to assist in
devel opment and probl em sol vi ng.
0 Creates a revolving fund to be used to publ ish and sell Department
publ ications.
9. The extent to which changes are necessary i n the laws of the Agency to
adequately comply w i t h the factors 1 isted i n the Sunset 1 aws
We do not recommend any specific statutory changes as a result of our
10. The extent to which the termination of the Agency would significantly
harm the public health, safety or welfare
Termination of the Department of Mineral Resources would not harm the
pub1 i c heal t h or safety.
While the Department contends that i t s termination would have a
negative impact on the public welfare, we are unable to verify any
economic impact. The Department could not provide us w i t h any
information regarding the number of mi n i ng operations establ i shed or
jobs created i n Arizona i n the past 4 years as a result of i t s
promotional a c t i v i t i e s . In addition, the Department cannot identify
any mining operation l i s t e d i n i t s Directory of Active Mines i n
Arizona ( September 1983) that either began mineral production or
increased production due to assistance provided by the Department.
The Department did provide us w i t h six separate case histories i n
which assistance was provided. However, none of these cases has
resulted i n any new mineral production.
11. The extent to which the level of regulation exercised by the Agency is
appropriate and whether 1 ess or more stringent 1 eve1 s of regulation
woul d be appropriate
T h i s factor does not apply. The Department has no regulatory
authority and our review did not disclose a need for any regulatory
The Department o f Mineral Resources ( DMR) has not operated i n an e f f e c t i v e
and e f f i c i e n t manner. I t s impact on the mineral industry cannot be
demonstrated and some statutory duties and i n t e r n a l l y devel oped directives
have not been f u l f i 11 ed. Department resources have not been e f f i c i e n t l y
used because o f poor management, including lack o f planning, organization,
reporting and control.
Department Effectiveness Has Been Limited
The Department's effectiveness i n promoting the mineral industry i s
questionable. The agency cannot demonstrate what impact, i f any, it has
had on mineral development. I n addition, DMR has not completely met i t s
statutory mandate, and i n t e r n a l l y established goals and a c t i v i t i e s have
not been completed.
Effectiveness Cannot Be Demonstrated - The Department i s unable t o
demonstrate i t s e f f e c t on the development of Arizona's mineral resources.
A1 though the Department does accumulate service measurements, such as the
number of o f f i c e v i s i t o r s , telephone c a l l s , mine v i s i t s and use of f i l e
information by the public, it cannot show the economic benefits of such
a c t i v i t y . The Department could not provide us with information regarding
the number of mining operations established or jobs created i n Arizona i n
the past 4 years as a r e s u l t of the agency's promotional a c t i v i t i e s . I n
addition, the Department cannot i d e n t i f y any mining operation 1 i s t e d i n
i t s Directory of Active Mines i n Arizona ( September 1983) t h a t began
mineral production or increased production due to assi stance provided by
the Department.
The Department insists that it benefits the development of Arizona's
mineral resources by providing technical assistance to various
individual s. However, the Department could not provide us with a 1 i s t of
people assisted, the type of assistance provided, how the assistance
helped create new mineral production, and why the assistance was not
available through the private sector. During our audit, the Department
stated that such information was not avai 1 able. However, after reviewing
our draft report, the agency provided one case example in which i t f e l t
i t s assistance had benefited mineral development. We asked for a1 1 such
examples of assistance occurring w i t h i n the past 3 years. The Department
provided us with five additional cases. The director stated that numerous
other cases could be provided b u t would be difficult to compile because of
the time required t o research and document the facts of each case. We
contacted the parties assisted to verify the facts of each case provided.
While assistance was provided by the Department in each case, none has
resulted in any new mineral production. These six cases are summarized
be1 ow:
Case 1: In August 1983 an Arizona insulation manufacturing
company requested DMR's assistance to help locate a basalt
deposit. DMR submitted several samples from various deposits for
evaluation by the company. During this period DMR was working
w i t h an out- of- state individual and informed him of the company's
desire for basalt. DMR then assisted this individual i n obtaining
samples from basalt deposits. These were submitted t o the company
for testing and resulted i n a bulk sample from one deposit. The
company found this sample very acceptable and wished t o f i l e a
claim on the deposit property. I t was told that the property had
a1 ready been claimed ( by the other individual with DMR's
assistance). Because the company wished to have i t s own claim, i t
has not purchased the basalt from this individual and i s s t i l l
searching for a basal t deposit.
Case 2: In 1981 DI'IR contacted an out- of- state beryl ium producer
and helped work out an arrangement for a local company to purchase
beryl ore in small lots. The local company would then sell the
ore to the out- of- state company i n the m i n i m u m purchase size of
ten tons. DF4R's efforts included evaluating possible ore buyers,
acting as consultant to the local company, providing news media
coverage to announce the 1 ocal buying station, provi ding
information to Arizona prospectors, and sending ore samples to the
out- of- state company for eval uati on. The 1 ocal company purchased
less than 200 pounds of ore before i t closed do\. rn. A t present,
there i s no active buying station i n Arizona. According to the
out- of- state company, a1 though DrlR has expended considerable
effort on the project, local prospectors have not shown enough
interest for i t to be successful.
Case 3: In April 1983 DMR was asked to a s s i s t a Canadian company
that was evaluating an inactive Arizona gold mine property. DMR
provided background information on the property and re1 ated mining
d i s t r i c t , and identified local contacts. DMR identified several
drilling firms b u t the company did not use any of these d r i l l e r s
because their prices were too high. DMR also recommended other
properties for consideration b u t the company turned them down
a f t e r i n i t i a l evaluation. The company found the original property
to be undesirable and has abandoned exploration a c t i v i t i e s in
Case 4: In 1983 DMR was asked to a s s i s t a German company that was
evaluating an Arizona mica property. DMR provided the company
w i t h information on the property and mica mining i n Arizona.
Later DMR helped the company obtain mica samples from the property
for evaluation. DrlR a1 so sent the company samples from three
other sources for evaluation. The company has determined that
none of the mica from Arizona i s suitable for i t s purposes. The
company i s not currently considering any mica sources i n Arizona,
a1 though i t i s will ing to evaluate future samples.
Case 5: A Utah company exploring a placer go1 d property i n Arizona
requested assistance from DMR i n November 1983. DMR has provided
the company with information on appl icable Arizona mining
regulations. DMR has also helped the company make contact with
other government agencies and 1 ocal 1 and surveyors. According t o
the company, DMR has not i denti f i ed other potenti a1 properties,
but the company has not asked f o r any. Depending on the results
of future exploration work, the company hopes to put t h i s property
i n t o production w i t h i n 12 months.
Case 6: I n 1979 a California man v i s i t e d DMR and requested
information on a p a r t i c u l a r old mine. The mine was i n a national
wilderness area not open t o mining. DMR has redirected t h i s man
t o investigate and obtain other promi s i ng mining properties. Thi s
man estimated he spends approximately $ 20,000 each year
prospecting and eval uating potential mining properties i n
Arizona. DMR has helped him f i l e mining claims, obtain ore
samples and i d e n t i f y where to send his samples for assaying. None
o f his claims, however, have resulted i n a productive mine. He
plans t o have a Nevada mining consultant evaluate one o f h i s
properties for potenti a1 production.
As shown by these s i x cases, the Department has provided assistance as
requested. Those assisted i n each case f e l t DMR expedited t h e i r
e f f o r t s and provided valuable information. The Department believes
these cases i l l u s t r a t e that it has been effective. However,
notwithstanding DMR assistance, none o f these cases has resulted i n
new mineral production.
Statutory Mandates Not Executed - The Department has also f a i l e d t o comply
w i t h several s t a t u t o r y mandates. The Department's enabl i ng 1 egis1 a t i o n
d i r e c t s it t o engage i n s p e c i f i c a c t i v i t i e s . * Arizona Revised Statutes
$ 27- 102 d i r e c t s the Department to:
" 1. Aid i n the promotion and development o f the mineral
resources o f the state.
2. Conduct studies o f the economic problems of
prospectors and operators o f small mines f o r the
purpose o f a s s i s t i n g i n t h e i r solution.
3. Assist i n discovering sources o f supply for persons
desiring t o buy minerals.
4. L i s t and describe available mining properties.
5. Make mineral resource surveys and conduct other
i n v e s t i g a t i o n s which may i n t e r e s t c a p i t a l i n the
development o f the s t a t e ' s mineral resources.
6. Serve as a bureau o f mining information i n
conjunction with the bureau o f geology and mineral
techno1 ogy.
7. Publish and disseminate information and data
necessary or advisabl e t o a t t a i n i t s objectives.
8. Cooperate with the state land department t o
encourage mining a c t i v i t y on state 1 ands.
9. Cooperate w i t h the corporation commission i n i t s
i n v e s t i g a t i o n s and administration o f 1 aws r e l a t i n g
t o the sale o f mining securities.
10. Cooperate with the bureau o f geology and mineral
technology, and d e l i v e r t o the bureau problems
which the f i e l d work o f the d i v i s i o n shows t o be
w i t h i n the scope of the a c t i v i t i e s o f the bureau.
11. Cooperate with federal and other agencies designed
t o develop mines and mineral s.
12. Oppose congressional acts favoring reciprocal or
duty free imports of foreign minerals.
13. Use i t s a u t h o r i t y i n other ways t o a s s i s t i n more
extensive expl o r a t i o n and development o f the
mineral resources o f the state. " ( emphasis added)
* A f t e r the end of our a u d i t fieldwork Senate B i l l 1048
( Appendix I I ) was passed, which modifies the Department's
The Department has not acomplished the statutory mandates emphasized
here. The Auditor General ' s staff reviewed DMR's performance of these
particular duties because they relate most directly to the Department's
main purpose and i t s ability to impact mineral development.
0 Aid i n promotion and development - The f i r s t statutory duty, to
aid in the promotion and development of Arizona's mineral
resources, is the Department's main purpose. A1 1 other mandates
specify how this objective i s to be accomplished. The Department
cannot demonstrate i t s effectiveness i n this role.
0 Failure to conduct mineral resource surveys - The Department has
not conducted mineral resource surveys. This information i s
essential for successful mineral development i n the state. DMR
has not used current available information to conduct the mineral
resource surveys.
The Department compl eted no mineral resource surveys during the
4- year period ending December 31, 1983. The Department published
mineral information circulars for the mineral s beryl ium, cobalt
and titanium. However, i n a written memo dated June 15, 1981 ,
the Department director stated that those reports were not
mineral reports and were t o be written for the general public.
The l a t t e r two reports concluded that development of cobalt and
titanium i n Arizona was not presently feasible. The Department
has not prepared reports on minerals such as copper, gold and
silver, which can feasibly be developed in the state. In
addition, these mineral information circulars are inferior when
compared w i t h mineral resource surveys pub1 i shed by other
states. The Department expended only the equivalent of one- tenth
full- time employee t o produce the reports.
Mineral resource surveys have not been conducted, although they
are essential for mineral development and the Department has the
prel iminary information f o r the surveys. According t o the
Department director, a major f i e l d problem f o r the mineral
i ndustry i s 1 ack of information on m i neral occurrences.
Therefore, he sees the need f o r mineral resource surveys and
would 1 ike t o conduct them, but states t h a t he lacks the staff,
time and funds t o do so.
Preliminary information t o support mineral resource surveys
already exists, a1 though the Department has not used it f o r t h i s
purpose. I n 1981, consultants h i r e d w i t h federal funding
completed the Mineral Industry Locator System ( MILS) f o r
Arizona. This system has information on more than 10,000 mineral
occurrences i n the state. The MILS data provides information
t h a t the Department could use as a base f o r conducting mineral
resource surveys on e i t h e r a geographic or commodity basis to
a t t r a c t capital t o the state's mineral industry.
Serve as bureau o f mining information - DMR does maintain a data
repository o f books, maps and mine f i l e s . However, the
Department has not developed an e f f e c t i v e system f o r gathering
and storing information. This information i s p o t e n t i a l l y
important f o r the devel opment of Arizona ' s mineral resources.
( See Finding 111, page 37 f o r our analysis o f t h i s function).
0 No cooperation with State Land Department - The Department has
not cooperated with the State Land Department t o encourage mining
a c t i v i t y on state lands. Such cooperation could b e n e f i t the
state by providing revenue from land leases and r o y a l t i e s on
mineral extraction. According t o the State Land Department, the
two agencies have not worked together on any j o i n t projects t o
i d e n t i f y state 1 ands with mineral potential. However, t h i s i s an
area of possible cooperation. The Land Department i s currently
compiling a l i s t of known mineral occurrences on state owned land
with the i n t e n t t o market these lands f o r t h e i r mineral potential.
I n addition, a1 though DMR has complained t h a t Land Department
requirements f o r mining state lands are too r e s t r i c t i v e , it has
not t r i e d t o work with the Land Department t o modify these
r e s t r i c t i o n s .
DMR's f a i l u r e t o comply with these statutory mandates weakens i t s a b i l i t y
t o e f f e c t i v e l y impact development o f the state's mineral resources.
Goals and A c t i v i t i e s Not Completed - The Department has further weakened
i t s effectiveness by not performing several a c t i v i t i e s and not achieving
goals planned as a part of i t s employee performance appraisal system.
Empl oyee Performance P l anning and Eva1 u a t i on reports ( PP& E) are the only
w r i t t e n means the Department uses t o specify goals and a c t i v i t i e s f o r i t s
s t a f f . There are no other planning documents t h a t d e t a i l the Department's
specific work a c t i v i t i e s . We reviewed planned goal s and a c t i v i t i e s f o r
the Department's five professional employees f o r the two and one- ha1 f year
period ending January 1984. We found t h a t several s i g n i f i c a n t a c t i v i t i e s
have not been completed by Department employees. These are summarized
be1 ow:
e Three hundred twenty contacts and reports on exploration
companies not performed - DMR had planned t o have engineers
contact and report on four exploration companies each month.
Reports were t o include the minerals the companies were
i n t e r e s t e d i n , areas of current expl o r a t i on a c t i v i ty and
suggestions on how the Department could help i n t h e i r
explorations. According to the director, t h i s a c t i v i t y was not
performed. While 1 imited work was done, no w r i t t e n reports were
The Department be1 i eves the expl oration companies woul d not be
w i l l i n g t o provide information on t h e i r a c t i v i t i e s . It plans t o
delete t h i s objective from future consideration. However, we
contacted several exploration companies and a1 1 stated they woul d
be w i l l i n g to provide DMR with such information.
Failure to complete this activity has deprived the Department of
information that might he1 p reduce duplicate exploration work
among different companies. I t has also decreased the
Department's a b i l i t y t o aid these companies i n the development of
Arizona ' s mineral resources.
r Agency publications not prepared - The Department had planned to
prepare and pub1 i sh the foll owing:
- twenty information circulars ( only six prepared)
- eight mineral reports ( none completed)
- eight area or d i s t r i c t reports on mining possibilities and
recommendations ( none compl eted) .
Failure to complete these reports as planned has deprived the
mineral industry of information that coul d increase mineral
development i n the state.
r Reports on mines and mineral properties not prepared - Engineers
were to v i s i t and write reports for agency f i l e s on 250 mines and
mining properties. The actual extent of t h i s activity cannot be
substantiated because the Department does not keep records on
which properties were visited and often does not prepare a
written report for i t s f i l e s . According to Department counts,
212 mining properties were visited i n fiscal year 1982- 83.
However, i t reports that only 71 mine reports were written. The
Department director said the other 141 mine v i s i t s were reported
i n empl oyee ' s weekly reports. However, we reviewed these weekly
reports and found them lacking in specific details regarding why
the v i s i t s were made and what information was gained to benefit
mineral development. Typical entries in the weekly reports are
shown be1 ow:
" Visited the Christmas Gift Mine in Sec. 34, T9s, R3E, Pinal
County. No evidence of activity."
" Visited the Orizaba Mine, Pinal County. No recent activity
i n evi dence. '
" Visited the Jackrabbit Mine, Pinal County. No evidence of
" Visited an old mill s i t e and large dump i n approximately NE
1/ 4, Sec. 5, T2s, R23W, cannot find i t i n MILS or on any
map. "
Failure to prepare informative mine v i s i t reports deprives the
mineral industry of information that could f a c i l i t a t e mineral
devel opment.
e Statistical studies/ reports not completed - The Department
planned to develop six reports on mineral activity. The
Department director said the six reports were not completed, b u t
he was unable to t e l l us how many were actually done.
e Six quarterly reports on ore buyer's policy not completed - ( Ore
buyer's pol icy refers to the conditions under which ore will be
purchased, the type of ore being purchased and c r i t e r i a ore must
meet. ) According to the Department director, only two such
reports were prepared.' However, he was unable to locate these
reports for our review. He further stated that the Department
obtains the ore buyers' pol icy by calling each ore buyer every 2
months. This information, however, i s not written down and i s
shared by employees through word of mouth only. The PP& E calls
for these reports to be written and distributed to small mine
These a c t i v i t i e s were not performed, although they were to serve as the
basis for evaluating employee performance. Further, although the PP& Es
are the only written means used to specify goals and a c t i v i t i e s for the
Department, the director has not completed performance appraisals annually
as required by Personnel Rul e R2- 5- 102. E. Most empl oyees were reviewed
less frequently, with some intervals as long as 26 months.
Department Management Has Been Poor
The Department has not efficiently managed i t s resources. The Department
contends that i t has been unable to perform i t s statutory duties and
accompl ish i t s internal ly establ i shed goal s because of the time required
t o provide individual technical assistance. However, this is not the
reason for i t s ineffectiveness. Rather, the agency has failed to
adequately plan i t s activities and properly manage i t s personnel.
Moreover, the Department lacks adequate reporting and control systems.
Technical Assistance Accounts for Few Resources - The individual
assistance function, which the Department cl aims 1 imi ts i t s effectiveness,
accounts for only 20 percent of the professional staff work load.
According to the director, providing assistance to individuals who call or
visit the Department is the agency's No. 1 priority. He further stated
that providing this service takes employees away from other activities and
makes i t impossible to perform agency planning. However, we found that
this activity consumes the equivalent of only one of five full- time
professional positions and therefore, leaves DMR sufficient time and
personnel to perform other duties. We conducted an intensive work study
of technical assistance because DMR employees indicated t h a t t h i s was a
Departmental priority and consumed the majority of work time. *
Inadequate Planning - DMR has not adequately planned i t s activities. The
Department made only one effort 6 years ago to prepare a written plan.
The agency prepared a 3- year master plan i n 1978 to guide i t s operations
during fiscal years 1978- 79, 1979- 80 and 1980- 81.
* On forms provided by Auditor General staff, DMR employees recorded
each instance the Department assisted individual s and the time taken
to provide the assistance, for a 6- week period ( December 15, 1983
tl~ rough January 31, 1984). Results were analyzed to determine the
amount of time spent on this activity and the type of assistance
provided. The appendix shows the type of assistance provided by DMR
during the study period.
The 3- year master plan, i n addition t o now being outdated, i s incomplete
and u n r e a l i s t i c . While the plan l i s t s functions t o be performed by the
Department, it does not quantify them or establish time frames f o r
completion of any p r o j e c t or a c t i v i t y . The plan does not indicate what
was t o be accomplished i n any of the 3 years it was supposed t o cover.
The 3- year master plan i s unreal i s t i c because it was based upon a 78
percent staff increase and the opening o f three f i e l d o f f i c e s over a
2- year period. A1 so, the Department has not completed several a c t i v i t i e s
of the 3- year plan, a1 though it has been 6 years since the plan was
created. Providing technical assistance on demand, a major a c t i v i t y of
the Department, i s not mentioned i n the plan. Moreover, eight other
a c t i v i t i e s i d e n t i f i e d as future a c t i v i t i e s have y e t t o be i n i t i a t e d .
Currently, the Department has no w r i t t e n plan t o guide i t s a c t i v i t i e s .
According t o the director, planning i s done o r a l l y on a daily, weekly and
monthly basis among employees. In addition, he feels ttie 3- year plan,
a1 though it has not been updated since 1978, i s s t i l l applicable and
guides d a i l y a c t i v i t i e s .
Poor Personnel Management - The Department director has inadequately
managed personnel resources. Department a c t i v i t i e s have not been
organized i n t o programs, nor has responsi b i 1 i t y been del egated. Empl oyees
have not been provided with s u f f i c i e n t direction to perform t h e i r duties.
The Department director has not organized the agency's a c t i v i t i e s i n t o
functional areas or assigned specific responsi b i l i ty t o employees. The
d i r e c t o r said t h i s has not been done because he believes the Department
has only one program - t o promote development of mineral resources. Four
of the f i v e professonal staff have been assigned the same duties, while
the duties o f the f i f t h employee vary s l i g h t l y . Consequently, no one has
u l t i m a t e r e s p o n s i b i l i t y for the success of any specific Department
a c t i v i t y .
Department employees have not been provided with s u f f i c i e n t direction to
perform t h e i r duties. The Department has not developed a policy and
procedures manual to provide gui del ines for i t s empl oyees. Basical ly , the
professional staff operate independently, control 1 ing their own work and
planning their own activities. While the director claims that some
direction i s provided through empl oyee performance appraisal s , the
a c t i v i t i e s thus planned are not accomplished or reported on. The lack of
adequate direction i s further demonstrated by a policy communicated on
July 10, 1980. The Department director stated i n a memo:
" I want to emphasize there are - no assiqned t e r r i t o r i e s nor are there' any commodities, process& or a c t i v i t i e s
assianed to one enaineer. tach enaineer i s free to ao
anywhere i n the state. . . discuss any property, a s s i s t
any prospector, discuss any processing method or other
activity. The one exception to t h i s i s that Mineral
Resource Conferences will be assigned for specific
areas to specific engineers. . . . ( emphasis added)
This policy i s s t i l l i n force. Lacking proper direction, employees may
involve themselves i n a c t i v i t i e s they enjoy, which may not be the most
efficient appl ication of time to accompl ish agency goal s and objectives.
Inadequate Reporting Inhibits Effective Control - The Department director
has not required employees to report on t h e i r a c t i v i t i e s or time spent i n
various Department functions. Employees are not required to report on
a c t i v i t i e s planned through the performace appraisal process. Employees
are only required to submit weekly reports, which contain only information
to be shared w i t h other employees or to be added to mine f i l e s .
The lack of adequate reporting hampers management control. Without
employee time reporting, i t cannot be determined how much time employees
are spending i n each Department function. Such information would help the
management determine i f resources are properly a1 1 ocated. Additionally ,
there i s no assurance that employees are using their time efficiently and
effectively to complete planned activities. Thus, management i s unable to
take corrective action to ensure that Department goals and objectives will
be accompl i shed.
The Department of Mineral Resources has not operated i n an effective and
efficient manner. The Department's effect on statewide mineral
development cannot be demonstrated and i s questionable. The agency has
not performed several statutory mandates nor accomplished internally
establ i shed goal s and objectives. The Department has failed to adequately
plan i t s programs, manage i t s personnel , and institute effective reporting
and control systems.
The Department of Mineral Resources should:
1. Perform a1 1 statutorily required duties directly re1 ated to
effective mineral devel opment i ncl udi ng:
0 make mineral resource surveys and other investigations to
interest investors in developing the state's mineral
a serve as a bureau of mining information ( see Finding I11
recommendations on page 42 1,
0 cooperate with the State Land Department to encourage mining
activity on state lands.
2. Develop an action plan to carry o u t i t s programs. The plan
shoul d include the foll owing components:
a objectives and specific goals,
0 activities necessary t o achieve goals,
0 time frames for completing activities, and
a quantifiable components of each activity t o measure progress.
This plan should be used t o direct the agency's activities.
3. Organize i t s a c t i v i t i e s into functional areas and assign specific
responsibility and accountability to Department employees.
4. Establish policies and procedures to provide clear direction for
employees to f o l l ow when performing their duties.
5. Institute ernpl oyee time reporting, project reporting ( as
appropriate) and reporting on a c t i v i t i e s to ensure that
Department goal s will be accompl ished.
6. Develop ways to measure program results and collect the data
necessary to determine the success of Department programs and
The Department o f Mineral Resources ( DMR) 1 acks adequate f a c i l i t i e s . The
b u i l d i n g t h a t houses the Department o f Mineral Resources has been steadily
d e t e r i o r a t i n g and currently has several potential safety problems
r e s u l t i n g from poor maintenance. The Department could be relocated e i t h e r
with or without the mineral museum because the museum could be
administered by others. The mineral museum i s not essential t o the
Department's operation.
Mineral Museum Building i s Deteriorating
Because o f Inadeauate Maintenance
The Department o f Mineral Resources' f a c i 1 i t i e s are steadily
deteriorating, posing potential safety problems and causing damage t o the
b u i l d i n g contents. Stemming from a lack of adequate maintenance, these
problems have now reached a state where renovation no longer appears
The Property Management Division of the Department o f Admini s t r a t i o n and
the State F i r e Marshal conducted inspections o f Dl4R's f a c i l i t i e s a t the
request of the Auditor General . These inspections i d e n t i f i e d problems i n
several areas :
The leaking roof has damaged the b u i l d i n g and some of i t s
contents, including various books, maps and mineral specimens.
e The e l e c t r i c a l system i s inadequate and does not meet the uniform
e l e c t r i c a l code. It poses a d i s t i n c t f i r e hazard.
e The f i r e alarm system i s inoperative.
e The plumbing i s antiquated and needs t o be replaced.
Missing floor t i l e i n the auditorium and o f f i c e area i s a hazard.
e The weight on the balcony f l o o r i s a potential problem. DMR has
been cautioned against adding any more weight i n c e r t a i n areas.
e The cool ing system i s inadequate and needs t o be rep1 aced.
0 The building does not have enough exits on the balcony ( in
violation of fire code).
Potential Safety Threat - These conditions threaten the health, safety and
we1 fare of empl oyees and visitors. Because the mineral museum attracts
many visitors, there i s a possibility that someone could trip and injure
themselves because of missing floor t i l e . Of more significance is the
possibil ity of someone being trapped on the balcony during a fire.
Therefore, the potential for a lawsuit against the state exists.
Damage to Building Contents - In addition to the risk of loss from fire,
these conditions are deleterious to the building and i t s contents.
Mineral specimens and data may be lost due to f i r e and the lack of an
operative f i r e alarm. Some of the specimens and data are irreplaceable.
Because the museum also displays specimens on loan, the state may be
1 iable for damage to these displays.
The deteriorating condition of the building i s harmful to i t s contents.
The temperature and humidity at DMR are damaging the books and maps stored
there. The Department's facil i ties are cooled by evaporation. According
to Library and Archives, evaporative cooling creates one of the worst
possible storage conditions for books and maps. Evaporative cool i ng
causes wide fluctuations i n temperature. Preferably, temperatures for the
storage areas of books and maps should be stable. A1 so, the materials a t
DMR are subject t o very humid and h o t conditions i n the summer. For every
10 degree increase i n average temperature, the 1 ife expectancy of a book
decreases by one- half. Thus, a book w i t h a 1 ife expectancy of 150 years
a t 65 degrees, has a l i f e expectancy of about 18.75 years a t 95 degrees.
In addition, the building's roof has leaked a number of times, saturating
several books and destroying several maps.
Inadequate Maintenance - Many of the buil ding's current problems have
evolved from a lack of proper maintenance. Neither the Arizona Coliseum
and Exposition Center Commission ( Coliseum) staff nor the DMR have
sufficiently maintained the buil ding.
The Coliseum has not maintained the building since 1969. Although the
Coliseum owns the building and therefore has the responsibility for
maintaining i t , there is no incentive for i t to do so. The Coliseum does
not use the building and DMR pays no rent. T h i s situation has existed
since 1950, when according to Board minutes, the Department and the
Coliseum mutually agreed that DMR would cease paying rent ( a t that time
$ 50 per month) and invest t h i s same amount i n monthly building repairs.
However, we could find no lease agreement or any memo of understanding
between the Coliseum and the Department to re1 ieve the Coliseum of i t s
responsibility to maintain the building. Presently, the Coliseum
maintains the area around the building and provides water, sewage and
outside 1 ights. The Department attempts to maintain the building i t s e l f ,
inside and outside, and pays for a l l u t i l i t i e s .
The Department has not provided sufficient maintenance on the mineral
building due to lack of funds. In DMR's budget for fiscal year 1983- 84
the Department requested $ 20,000 to perform maintenance on the buil ding.
According to the Department, there has been no scheduled building
maintenance for the l a s t 30 years, and what maintenance i s done i s
performed by the museum curator and office personnel. In addition, the
Department requested $ 1 0,000 for an architectural study to determine i f
the existing building should be enlarged, remodeled, or condemned, or i f
new f a c i l i t i e s would be more feasible. No funds were appropriated for
either request.
Because the Department of Mineral Resources' building i s owned by the
Coliseum, i t receives no maintenance assistance from the Property
Management Division of the Department of Administration ( DOA) that i s
responsible for performing maintenance on state buil dings.
Renovation Not Feasible - Because of the lack of regular maintenance on
the building, the cost of renovating i t would be high. F a c i l i t i e s
Planning, a section of the Property Management Division of DOA, estimated
the cost a t $ 425,000. Table 2 shows the items upon which the estimate i s
Ite m
E l e c t r i c a l upgrade t o meet a1 1 codes
Pl umbi ng upgrade, i n c l udi ng handicapped accessi b l e restrooms
Sandbl a s t i ng and p a i n t i n g e x t e r i o r
Re- roof f l a t r o o f sections
Re- roof mission t i l e
Replace three double doors i n f r o n t o f b u i l d i n g
Brick up openings and south end
Repair p a r t i t i o n s on i n t e r i o r
Replace suspended c e i l i n g i n Lecture Room
Replace f l o o r t i l e i n Lecture Room
I n s t a l 1 a s p r i n k l e r system
Replace c e i l i n g and f l o o r i n o f f i c e areas
A r c h i t e c t u r a l and engineering fees 35,000
Source: F a c i l i t i e s planning section o f the Property Management Division,
Department o f Administration
The cost o f renovation i s almost as much as Property Management's
estimated cost o f $ 460,000 t o replace DMR's present square footage. I n
f a c t , when the Col iseum's executive d i r e c t o r discovered the estimated cost
o f renovating the building, he indicated it would be b e t t e r t o l e v e l the
b u i l d i n g and s t a r t over r a t h e r than attempt t o renovate it. The
Department could never a f f o r d the expense o f renovating the b u i l d i n g
unless a special appropriation were made. The Coliseum, on the other
hand, would have t o charge DMR r e n t t h a t may be p r o h i b i t i v e i n order t o
j u s t i f y the investment t o renovate the b u i l d i n g .
Renovating the current b u i l d i n g and remaining there may not be i n the best
i n t e r e s t of the Department. The Department has crowded o f f i c e f a c i l i t i e s
i n i t s present location. I n addition, the Department believes t h a t
r e l o c a t i n g closer t o the Capitol would improve access f o r i t s patrons,
improve access t o t h e L e g i s l a t u r e , and increase exposure f o r and use of
the mineral museum. Property Management supports a move to the Capitol
area because of an i n t r a s t a t e governmental agreement to build up the
Capi to1 area.
The Department Could
Relocate With the Museum
Because the museum requires so much space, there are very few s i t e s that
could accomodate both DMR and the museum. One potential s i t e i s the
Capitol Mall area. Other s i t e s would require that the Department lease
commerci a1 space.
The mineral museum occupies approximately 85 percent of DMR's current
facil i t i e s . The building covers 11,050 square feet, and approximately
9,500 square feet of this space is taken up by the mineral museum. The
Department would like to more than double the size of the mineral museum.
A t present, DMR operates i n crowded conditions ( approximately 1,600 square
feet of office space). The Department has requested 4,500 square f e e t f o r
o f f i c e f a c i l i t i e s . Property Management personnel have indicated that the
request is not unreasonable. In fact, t h i s request is w i t h i n state
guidelines established to determine how much space to a l l o t an agency.
Relocate to Carpenter's Local Building - The Carpenter's Local Building on
15th Avenue and Washington could house the Department offices i n the
future. The building is privately owned b u t the state is planning to
purchase the entire block i t sits on. I t will be a t l e a s t 2 years before
this property is purchased. According to Property Management, i t plans to
allow DMR to relocate to t h i s s i t e . While the building would not be large
enough to house the mineral museum, there i s enough property adjacent to
i t to construct f a c i l i t i e s for the museum. A new building would cost the
state approximately $ 45 per square foot, plus architectural fees,
u t i l i t i e s , etc. This would amount to approximately $ 450,000 for a 9,500
square foot building ( the current size of the museum). However, the
Department has indicated that i t needs approximately 20,000 square feet to
display all i t s mineral specimens and exhibits, which would increase the
cost to $ 950,000.* Therefore, i f the state purchased the s i t e and built
the new f a c i l i t y the total building cost would be a one- time expense of
approximately $ 450,000** for a 9,500- square- foot facil i ty. DMR would pay
yearly rent of $ 126,000 to the state. ( T h i s figure accounts for 4,500
square feet of office space and 9,500 square feet for a new museum, a t $ 9
per square foot. )
Because the s t a t e could possibly enter into a leaselpurchase agreement
w i t h the Carpenter's Union for the building, DMR could conceivably
relocate i t s administrative offices as early as July. What the
Carpenter's Union would charge for rent i s unknown.
The museum is a t o u r i s t attraction drawing many out- of- state visitors.
Relocating the museum to the Carpenter's Hall Building would increase i t s
access to tourists visiting the Capitol area.
Relocate to Commercially Leased Office Space - The Department of Mineral
Resources could lease commercial f a c i l i t i e s as an a1 ternative to the
Carpenter's Hall Building. According to Property Management, rent on
commercial space ranges between $ 14 and $ 20 per square foot for office
f a c i l i t i e s and between $ 9.50 and $ 10.75 per square foot for museum space.
The museum rent would be a t a reduced rate because of i t s size and limited
requirements. Table 3 shows the estimated cost of leasing space
comparable to what DMR currently occupies and the estimated cost of
leasing the space i t be1 ieves i t needs. However, any square footage
combination i s possible.
* If a decision i s made to construct new f a c i l i t i e s for DMR the state
could consider a lease/ purchase agreement. Under proposed Senate Bill
1185 the s t a t e could a1 low someone else, for example a financial
i n s t i t u t i o n , t o finance and build the f a c i l i t i e s and then enter into a
1 easelpurchase agreement. Currently this type of 1 ease/ purchase
option is not specifically addressed as being legal. According to
Property Management the 1 ease/ purchase option woul d be cheaper in the
1 ong run. ** excludes purchase price of land
DMR' s Current Square Footage
1,600 square feet - office f a c i l i t i e s
9,500 square feet - museum
11.1 00 total square feet
DMR's Desired Sauare Footase
4,500 square feet - office building
20,000 square feet - museum
24,500 total square feet
Cost to Lease Per Year
Cost to Lease Per Year
T. . h e- - D- ero- a. r t- m- - e nt- C- - o- ul d ~ Re1 ocate Without the Museum
The Department of Mineral Resources could be re1 ocated without the mineral
museum. Because the museum is not essential to the operation of the
Department, control of the museum could be transferred to another agency.
T h i s would f a c i l i t a t e the move and reduce the rent that the Department
woul d pay.
History of the Museum - The Department of Mineral Resources acquired the
mineral museum by default. The building that houses the mineral museum
was constructed between 1917 and 1919, and was only to be open for
exhibition during the State Fair. Early in 1947 DMR was given office
space i n the mineral building. A t this time the Department opened the
mineral museum to coincide with i t s office hours, whereas previously the
museum was open only during the State Fair.
The mineral museum was supported by the mining industry u n t i l 1975. Six
large copper companies provided funding f o r the museum between 1953 and
1969. The Arizona Mining Association, made up o f 14 major copper
producing companies i n the state, funded the museum from 1969 t o 1975.
The ) lining Association deeded i t s i n t e r e s t i n the museum t o the state i n
1973, but continued t o fund the museum f o r 2 years. The mineral museum
has been funded by DMR since 1975.
Museum i s Not Essential - The mineral museum i s not essential t o DMR's
main purpose. P r i o r t o enactment o f Senate B i l l 1048 toward the
conclusion o f our a u d i t , the Department o f Mineral Resources statutes did
not authorize the Department t o have a museum. The Department views i t s
primary function as furnishing information t o miners, exploration
companies and prospectors. I n a survey o f s i m i l a r departments i n nine
western states, only two stated t h a t they had a mineral museum w i t h i n
t h e i r department. However, one o f these museums consists o f only three
display cases and the other, while large, i s under a Department housed
w i t h i n the u n i v e r s i t y system. I n addition, the main r o l e of the museum
appears t o be educational i n nature, and consequently, does not r e l a t e to
DMR's scope or purpose. I n f i s c a l years 1981- 82 and 1982- 83, 170 and 180
tours of the museum were given, respectively. Sixty- one tours have been
given between July 1, 1983 and February 2, 1984. The vast majority o f
these tours are given t o school groups. Approximately 2,400 people
attended the 61 tours.
Transfer Museum to Another Agency - Other agencies with an educational or
h i s t o r i c a l r e s p o n s i b i l i t y have been investigated t o i d e n t i f y the
p o s s i b i l i t y o f t r a n s f e r r i n g control o f the museum t o another agency.
Auditor General s t a f f have made i n q u i r i e s of several state agencies to
assess t h e i r i n t e r e s t i n administering the mineral museum. If the museum
i s turned over to another agency, operating funds such as the curator's
salary could be transferred with the museum.
Central Arizona Museum - The Central Arizona Museum of History,
a f f i l iated with the Arizona H i s t o r i c a l Society, i s prepared t o discuss
the p o s s i b i l i t y o f including the mineral c o l l e c t i o n i n - its new Central
Arizona Museum f a c i l i t y . However, the question of the importance of
the c o l l e c t i o n and the funds t o maintain it are o f i n i t i a l concern i n
pursuing t h i s matter.
Arizona Board of Regents - The Arizona Board o f Regents i s also
considering the possi b i 1 i t y of administering the museum. However,
they are exploring many factors, including the u t i l i t y of the e x h i b i t
t o i t s teaching and research program, the costs involved, and whether
additional state resources are avai 1 able to fund attendant expenses.
The Board of Regents already has statutory authority f o r a state
mineral museum. Arizona Revised Statutes $ 1 5- 1 631 states:
" A. There shall be a state museum f o r the c o l l e c t i o n
and preservation o f the archaeol ogical resources,
specimens of the mineral wealth and the f l o r a and fauna
of t h i s state.
0. The Arizona board o f regents shall d i r e c t and
manage the museum and s h a l l s e t apart s u f f i c i e n t space
t o accommodate it. " ( emphasis added)
According t o the Board o f Regents, a museum i s housed a t the
University of Arizona.
Veteran's Memorial Coliseum - Administrative control of the museum
could be transferred t o the Coliseum. Coliseum ~ ersonnel have
indicated they would not object t o t h i s . However, the museum would
only be open during the State Fair.
D i s t r i b u t e Exhibits and Specimens Among Several Agencies - The museum
sDec1mens could be d i s t r i b u t e d amonq several aqencies, such as the
capit o1 Museum, Central Arizona Museum, Board of ~ e ~ e n t sV, e teran's
Coliseum, DMR and any other interested agencies. Because only
one- third of - the c o l l e c t i o n i s currently displayed, t h i s option may
provide better exposure f o r the specimens while minimizing the space
problem. I n addition, DMR may be able t o r e t a i n some specimen samples
t o assist prospectors i n i d e n t i f y i n g mineral finds.
Transferring the Museum away from DMR would decrease the amount of space
needed by the Department and consequently, decrease the rent required.
Relocation Costs - If the Department i s relocated without the museum, it
could be located i n e i t h e r state- owned f a c i l i t i e s o r commercial space. I n
e i t h e r instance, the reduced space requirements would r e s u l t i n reduced
rental costs.
Property Management personnel have said i t i s probable that DMR could have
administrative office space i n the Capitol Mall by l a t e November. In
July, the price t o r e n t state- owned f a c i l i t i e s will be $ 9 per square
foot. Therefore, yearly r e n t f o r DMR f a c i l i t i e s would be $ 14,400 for
1,600 square f e e t ( t h e i r current space) or $ 40,500 for 4,500 square feet
( DMR' s perceived space requirements) .
The Department of Mineral Resources coul d 1 ease commercial office space.
Currently, the commercial leasing rate is between $ 14 and $ 20 per square
foot based on a year's lease. Consequently, t h i s alternative may be too
costly. For example, i f DMR were to lease 1,600 square feet, their
current office space, the cost would be somewhere between $ 22,400 and
$ 32,000 per year. However, i f DMR were to lease 4,500 square feet, the
amount they feel they need for adequate f a c i l i t i e s , the cost would
increase to between $ 63,000 and $ 90,000 per year.
The Department of Mineral Resources needs better f a c i l i t i e s . Although
a1 ternative facil i t i e s are avail able in the near future, DMR' s
responsibility for the mineral museum complicates the matter. However,
the DMR does not need to maintain the mineral museum to f u l f i l l i t s
statutory obl i gations.
The Legislature should determine i f the mineral museum should be retained
as a function of the Department of Mineral Resources.
1. If the mineral museum i s not deemed to be a necessary function of
DMR, then the museum should be transferred to another agency or
distributed among several agencies. In addition, funds should be
appropriated for relocating the Department to the Capitol Mall
area and for rent.
2. I f the museum i s deemed necessary to the operation of the
Department of Mineral Resources, then DMR and the mineral museum
should be relocated to the Carpenter's Building s i t e as soon as
i t becomes available. This will require the state to purchase
the s i t e and to build f a c i l i t i e s for the museum. Funds will have
to be appropriated to DMR for renting the f a c i l i t i e s .
The Department of Mineral Resources ( DMR) has not developed an effective
system for gathering and storing information. Dt4R does not adequately
gather and maintain information for its mine f i l e s . In addition, the
present system for f i el d visits is unorganized and unproductive. Finally,
the maps and books i n the data repository are not inventoried or cataloged.
The Department has accumulated a data repository that contains more than
5,000 books, 3,500 maps, 50,000 mine cards, 6,000 mine f i l e s , and other
reference materials. The Department's mine cards have brief information
on mineral occurrences throughout the s t a t e , and the mine f i l e s contain
history and more detailed information on particular mines or mineral
occurrences. The vast majority of these mines are inactive* - they never
achieved production or the economically feasible ore has already beer1
extracted. In general, the f i l e s may include information on ownership,
commodities, past production, assay information and geologic information.
The Department has been coll ecting this information since 1939.
DMR Does Not Properly Gather and
Maintain Information For Mine Files
A1 though the mine f i l e s are a potentially valuable resource, the f i l e s are
incomplete and inconsistent. Also, DMR has failed to properly gather and
maintain information for these f i l e s .
Mine Files Important - The Department's mine f i l e s are a potentially
valuable source of information. DMR considers the mine f i l e s and the
expertise of its engineers to be the most valuable asset of the
Department. Additionally , many members of the mining industry i n Arizona
be1 ieve t h i s information i s val uabl e.
* There are approximately 90 active, producing mines i n Arizona.
The mine f i l e s can be used i n a number of ways. For example, the f i l e s
can he1 p miners i d e n t i f y productive areas f o r exploration and r u l e out
other areas. This information could a1 so help miners explore a p a r t i c u l a r
part o f an underground mine.
Mine F i l e s Inconsistent and Incomplete - A1 though the f i l e s are
p o t e n t i a l l y very useful, the information i s inconsistent and incomplete.
A l l the f i l e s do not have s i m i l a r information. For example, some f i l e s
contain information on geologic formations and others have no references
t o geology. Some mine f i l e s include several DMR f i e 1 d v i s i t reports and
others do not have any reports. Because they are incomplete and
inconsistent the f i l e s are not as useful as they should be.
There i s no index l i s t i n g the contents o f the f i l e s . With the current
system, users must search through an e n t i r e f i l e t o determine what
information it contains. Furthermore, the Department has no way of
knowing i f a l l available sources o f information f o r a p a r t i c u l a r f i l e have
been contacted. An index woul d a1 1 eviate these problems.
DFlR Lacks Procedures f o r Creating and Maintaining F i l e s - DMR does not
have standard c r i t e r i a f o r creating mine f i l e s or formal procedures
governing what should be included i n the f i l e s . The Department's
engineers judge whether a given piece o f information on a mineral
occurrence warrants the creation o f a mine f i l e or should be included i n
an e x i s t i n g f i l e . This procedure does not ensure t h a t judgments w i l l be
consistent between engineers.
Because of the lack o f standard procedures, a l l e x i s t i n g sources of
information are not consulted. When the Department creates a mine f i l e it
includes only the information it has on hand. If DMR developed and used a
standardized form with steps f o r checking information sources such as the
owner of a mine, the Bureau of Land Management, the Mine Inspector's
Office, the Bureau of Geology and Mineral Technology, and the United
States Bureau o f !+ lines, the f i l e s would be more complete and useful.
According t o DMR, it has not implemented these standard procedures because
o f a lack o f time and funds.
DMR's process for gathering data is unpl anned and incomplete. Engineers
obtain information for the files only as i t comes to their attention i n
the course of their regular activities. This information may be received
from incoming phone call s, office visitors, fie1 d visits and professional
literature. The information obtained by the engineers i s communicated
through their one- page weekly reports. No formal program or activity has
been designed to gather data.
Thus, there i s no control over the k i n d of information received and no
assurances that information will be uniformly received for any of the mine
files. All engineers are expected t o gather information, b u t no one has
ultimate responsibility. Because no systematic method is used to obtain
mine f i l e information, there is no assurance that employees will receive
sufficient data.
Personnel resources have not been committed to the mine files. None of
the staff are specifically assigned to review, update, or create mine
files. The only work on the mine f i l e s i s an extension of other
Department activities. Specific employee resources shoul d be assigned to
the mine files to ensure that they are updated and i n proper order, and
that all available information i s collected and entered. Such a
commitment would improve the reference value of mine files.
Fiel d Visits Are Unorganized
and Unproductive
Fiel d visits are unorganized and unproductive. The Department's pol icy i n
this area i s ineffective. DMR gathers very 1 i t t l e data on field visits.
A field v i s i t is when an engineer visits either a mine or someone outside
of the Department.* The Department considers these field visits an
3 Three months of DMR's most recent field visits were examined.
Thirty- eight of the visits were t o mines. Seventeen of the visits
were to indivi dual s or companies.
3 9
important source of information. DMR said that i t i s sometimes necessary
to v i s i t a mine or a mine operator in the field to gather information,
particularly when DMR assists with technical problems a t mines. DbIR
personnel made 374 fiel d visits during fiscal year 1982- 83. Each fiel d
v i s i t may last a few hours or several days.
Ineffective Pol icy For Field Visits - The Department's current pol icy on
mine visits is sporadic and ineffective. The director explained the
Department's policy i n a memo dated July 10, 1980:
" I want to emphasize there are no assigned territories
nor are there any commodities, processes, or activities
assigned to one engineer. Each engineer i s free t o go
anywhere in the s t a t e ( h i s budget permitting), discuss
any property, assist any prospector, discuss any
processing method or other activity. " ( emphasis added)
This memo shows that DMR' s pol icy provides 1 i t t l e direction regarding
which mines the engineers should visit. The Department does not have any
comprehensive plans for using the field visits to gather data. There is
no predetermined schedule for field visits. O f 62 field visits we
evaluated, only 21 ( 34 percent) were visited in relation to a Department
project. Nine ( 15 percent) of the visits were made simply because the
mine or person was " in the area or on the way." These figures do not
compare favorably with Nevada ' s f i gures. According t o the director of
Nevada's Bureau of Mines and Geology, 99 percent of all their field trips
are related to a specific Department program. All the field visits must
be justified to the director. The director believes that without this
control, some engineers are likely t o go on field visits " just to get o u t
i n the field."
Little Data Gathered on Mine and Field Visits - DMR gathers 1 i t t l e and
sometimes no information on field visits. Table 4 shows data collected as
a result of 55 field v i s i t s . The topics in the table are the Department's
categories for information gathering during fiel d visits.
Type of Informati on Gathered Percentage of Time Gathered
Ownership Information
Geologic Information
Sampl es Taken
Plans of the Operator
Accessibil i ty or Locational
Economic Feasi bil i ty
Type of Minerals Produced
Statistics on Production
General Information on Mine
Information on Mining Technique Used
No Information Acquired
As the table shows, none of the information types were gathered more than
27 percent of the time. Most types of information are gathered even less
frequently. Much of the information coul d be gathered more efficiently
without f i e l d v i s i t s . Better policy governing the field visits would
improve the process.
Data Repository Is
Poor1 v Manaaed
The books and maps in the data repository are poorly managed. The
Department does not have a comprehensive inventory or catalog of i t s books
and maps. Therefore, i t cannot tell what materials are avail able or where
they are stored.
The Department's system for locating books and maps i s inadequate. Under
the current system, DMR personnel locate the books and maps based on their
experience in using these materials. Thus, i f a book or map has been used
a number of times before, some of the staff will probably have some idea
of where the material i s stored. According to Library and Archives, this
system i s poor for the following reasons. First, since DMR does not know
exactly what materials i t has, the materials can't be used t o their
fullest extent. Second, new personnel have no re1 iable way t o locate
materials. Third, there is no way for a vistor to determine i f materials
that might be useful to him are available a t DMR. The Department said i t
has not inventoried or cataloged these materials because of a lack of
A complete inventory and a cataloging system would solve these problems.
Library and Archives notes two additional benefits. First, cataloging
would help determine whether DMR has any rare or valuable items. Second,
having a duplicate catalog a t Library and Archives would help other
potential users of DMR' s information know what material s are available.
The task ~ voudl require additional work. Library and Archives estimated
that i t would take one person a year to properly inventory and catalog the
5,000 books. If the Library and Archives' computer were used i n the
cataloging process, i t could be completed w i t h i n 6 months. Additionally,
Library and Archives estimated that i t would take one person between 6 and
9 months to completely inventory and catalog the 3,500 maps. Library and
Archives should be able to a s s i s t DMR i n the inventorying and cataloging
The Department of Mineral Resources has failed to develop an effective
system for gathering and storing information. The procedures for
gathering and maintaining information for the f i l e s are poor. The mine
v i s i t s are unorganized and unproductive. The books and maps i n the data
repository are not inventoried or catal oged.
1. The Department should improve the information gathering function by:
0 Establishing standard c r i t e r i a on establishing mine f i l e s .
e Requiring employees to routinely contact certain sources of
information when creating a mine f i l e , to ensure that the f i l e is
as complete as possible.
e Determining what specific data should be included i n a mine f i l e
and using t h i s as a standard index form f o r each f i l e .
e Establishing specific programs t o gather information f o r the mine
f i l e s .
e Assigning specific personnel resources t o maintain and update the
mine f i l e s .
2. The Department should develop p o l i c i e s and procedures to better
organize, control and apply fie1 d v i s i t s .
3. The Department should inventory and catalog i t s books and maps.
Library and Archives should be asked t o assist i n t h i s e f f o r t .
We developed other pertinent i nformati on regarding the possible
consol idation of several state agencies re1 ated to mines and mineral s.
Agencies With Re1 ated Functions
There are four state agencies i n Arizona with activities related to mines
and minerals. The Department of Mineral Resources promotes the
development of the state ' s mineral resources and provides assistance and
information to the mining industry. The Bureau of Geology and Mineral
Technology ( which i s associated w i t h the University of Arizona, College of
Mines) performs geologic mapping, geology and mineral research and
provides information to the public and mining industry. The State Mine
Inspector inspects active mines for health and safety requirements. The
Oil and Gas Conservation Commission regulates oil and gas wells, both i n
exploration and production.
Similar Purpose and Functions
Two of these four agencies have potentially overlapping responsibilities,
and the other two agencies can provide valuable information to be used in
mi neral devel opment.
The Department of Mineral Resources ( DMR) and the Bureau of Geology and
Mineral Technology ( Bureau) have similar statutory responsibilities. Both
are directed t o be involved i n mineral development and maintain
information on Arizona's mineral resources. A compari son of both
statutory mandates i l l ustrates thi s re1 ati onshi p. In part the DMR i s
charged to:
" Aid in the promotion and development of the mineral
resources of the state. "
" Make mineral resource surveys and conduct other
investigations which may interest capital i n the
development of the s t a t e ' s mineral resources. "
" Use i t s authority i n other ways t o assist i n more
extensive exploration and development o f the mineral
resources of the state."
DMR's statutory duties can be compared t o the Bureau's statutory
" The bureau shall have as i t s objectives:
1. To inform the public i n matters concerning the
geological environment and the development and use
o f the mineral resources o f t h i s state.
2. To encourage the wise use o f the lands and mineral
resources o f t h i s state toward i t s devel opment.
3. To provide technical advice and assistance i n
geology and mineral technology t o other state and
1 ocal governmental agencies engaged i n projects i n
which the geologic setting or the mineral resources
of the state are involved.
4. To provide technical advice and assistance i n
geology and mineral techno1 ogy t o industry and other
members of the public toward the wise development
and use o f the mineral and land resources of t h i s
state." ( em~ hasis added1
According t o both DMR and the Bureau, there i s no duplication between the
agencies because the Bureau i s research and technical oriented while DMR
i s promotional i n nature.
I n addition, the O i l and Gas Conservation Commission was created because
o f a state p o l i c y t o " encourage development o f natural resources of o i l
and gas and t h e i r products." O i l and gas exploration companies are
required t o furnish t o the Commission a log, core record, d r i l l i n g history
and samples of d r i l l b i t cuttings and cores f o r a l l wells. This
information can be u t i l i z e d by both the Department of Mineral Resources
and the Bureau o f Geology and Filineral Technology. While the State Mine
Inspector has no charge regarding mineral development, it does r e l y on DMR
for information and has the potential t o provide DMR with information on
proposed and actual mining a c t i v i t i e s .
Other States
In a survey of nine other western states* we found only one state ( Nevada)
that had an independent mineral department similar to DMR. The other
eight s t a t e s include their mininglgeology related agency as part of a
broader, larger department. Four states delegate the DMR function to a
department of natural resources. Three s t a t e s i ncl ude their
mininghineral related functions w i t h i n a university system and one state
includes i t w i t h i n a geological survey agency. In surveying other western
states we found that no department of natural resources performed the same
functions as Arizona's DMR.
Table 5 shows agencies i n other s t a t e s t h a t administer programs similar to
Arizona's DMR, Bureau of Geology and Mineral Technology, Oil and Gas
Conservation Commission and the State Mine Inspector.
* We surveyed Alaska, Cal ifornia, Colorado, Idaho, Montana, Nevada, New
Mexico, Utah and Nyoming.
State Agency i n Other State Administering Similar Program
A1 aska Department of
Natural Resources
Cal ifornia Department of
Colorado Department of
Natural Resources
Idaho State University Department of Lands None
Itlontana State University Department of Department of Laborl)
Natural Resources and Industry
Nevada Independent State University Department of Department of
Agency Conservation and Industrial Re1 ations
Natural Resources
Department of a
New Mexico State University
Energy and Mineral s
Utah Department of
Natural Resources
Independent Agency Independent Agency 1)
Wyoming Geol ogi cal Survey
of Wyoming
During the course of the a u d i t , we i d e n t i f i e d p o t e n t i a l areas f o r f u r t h e r
audit work t h a t we could not pursue due t o time constraints. These areas,
which were outside the scope o f our audit ( see page 3), include these
concerns :
0 Does the Department have adequate inventory controls and security over
the museum specimens? ( The Department estimates the value o f i t s
mineral c o l l ection t o be between $ 750,000 and $ 3,000,000. )
e Could an automated system analyze and provide mineral occurrence and
inactive mine information to prospectors and expl oration companies
more e f f i c i e n t l y ?
e Has the Department made f u l l use o f available federal d o l l a r s f o r
p r o j e c t funding?
AUDITOR GENERAL COCiMENT
Because of the nature and tone of the response of the Department of
Mineral resources, we offer the fol 1 owing two com~ ents.
First, the agency's response contains several misleading and inaccurate
statements. We have reviewed the agency's response i n detail and are
prepared to address any specific points i t raised.
Second, d u r i n g the course of the audit we made every e f f o r t t o collect,
analyze and report a1 1 pertinent information on the agency's efficiency
and effectiveness i n meeting i t s vain objectives. We were impaired i n
this endeavor by a number of factors.
I n some cases in; portant documentary evidence was not available. In other
cases, however, available evidence was not provided on a timely basis, and
sometimes was not provided a t all until late i n the audit. In several
other instances we were told information existed, b u t our attempts to
obtain the information led to repeated changes i n the Department's
position on the information. In addition, verbal s t a t e ~ e n t s about agency
procedures and operations were freqently changed when we attempted to
confirm the information i n writing.-
Mineral Building, Fairgrounds, Phoenix, Arizona 85007 ( 602) 255- 3791
June 19, 1984
William Thomson, Director
Performance Audit Division
111 West Monroe, Suite 600
Phoenix. Arizona 85003
Dear Mr. Thomson:
Enclosed is the department's response to the revised preliminary
report draft of the performance audit dated June 8, 1984. Please
contact us if there are any questions. We would appreciate knowing
the date and to whom the report is to be released. We assume all
members of the Board of Governors will receive a copy.
Very truly yours,
c o h n H. Jett
JHJ : db
cc: Board of Governors
Mineral Bu~ ld~ nFga, irgrounds, Phoenix, Arizona 85007 ( 602) 255- 3791
June 19, 1984
The recommendations resulting from a seven month long study of the department
are somewhat mediocre, particularly when related to the lengthy time interval
involved. A majority of the recommendations resulted from the department not
having written " guidelines" for its various activities and not keeping records
of the financial activities of the members of the public which we have assisted.
The recommendations in Finding Three are quite minor and easily complied with.
It is interesting to note that the major part of these findings are based on
activities not found in the department statutory duties, but on activities
that the department has created in an effort to obtain data effectively and
make that data easily retrievable. There is no problem in putting down on
paper what the department is presently doing. However, unless the priorities
of the department are changed, with direct assistance to the public becoming
secondary, additional staff will be required to comply with the recommendation.
We want to emphasize that it is the public who spends the monies in Arizona
on Arizona minerals, not the mine files themselves. It is the engineers that
the public wants to talk to first and last, with the mine files only an inter-mediate
The department is a small agency and over 60% of the staff is technical. Being
small, with 11.5 total employees, management keeps control of the day- to- day
operations. This method has worked satisfactorally, apparently, for the last
40 years. It has not been necessary to waste staff time and create an internal
mountain of paperwork that must be changed in order to keep up with changing
conditions. Management hopes that it does not need to get so wrapped up in
planning activities that it does not have time to do its work.
It is unfortunate that the Auditor- General's Performance Audit Report had to
rely on errors, omissions and supression of all positive factors. Apparently,
the criteria used to determine the effectiveness of the agency were established
without knowledge of the function of the agency, the needs of those interested
in Arizona minerals or of the mineral industry. Nowhere in the report is
there an indication of any survey the auditors made of how members of the
mineral industry perceive the values and effectiveness of the operation of the
department. There is one mention made that the " mining industry" in Arizona
believes our mine files are useful.
Although the primary duty of the technical staff is to respond to requests
of assistance by the public, the purpose of the agency is also carried out
through projects and duties initiated by the director and the staff internally.
It is the duty of the staff to maintain an awareness of the overall economic
mineral climate and mineral industry operations on a world- wide scope. The
staff continually considers the relationship of Arizona's mineral resources
potential and the world economy. As a result, the staff often initiates
contact with a potential developer, or possibly prepares a lecture series
to educate the State's prospectors or evaluates specific mineral occurrences
to update files of properties which might again be of interest. Among others,
these are continuous activities of the staff, often limited by responding to
the needs and requests of the public. At no time is the agency just sitting
and waiting for the public to make requests.
Mineral Building, Fairgrounds, Phoenix, Arizona 85007 ( 602) 255- 3791
The audit team apparently worked hard to try to find negative factors. Good
examples of this are their interpretation of the six case histories of
activities printed in their report. In each case, the positive aspects of the
activities, including the financial gain to the State and the valuable new
mineral related data gained, all were carefully omitted. In fact, a member
of the audit team met, on several occasions, the people involved in some of
the case histories. Evidently the interview reports were too positive to
be included in the original report.
The small staff of the department is technically oriented. The director of
the agency, by statute, must be a registered mining engineer. As such, the
management relies on the professionalism of the engineers to do their job.
Since there is no way to pre- determine how many people will require assist-ance,
the degree of assistance ( from a few minutes to intermittent assistance
over a period of months), changing economic climate for minerals, variety of
minerals involved, changing statutes or Federal regulations affecting
minerals, plus many other variable conditions, it is almost impossible to
establish fixed guidelines, including time frames, for specific activities
and have them remain fixed and viable for any length of time. There is
nothing fixed about the staff's duties that can relate to a time scale and
be realistically maintained.
The first statuatory duty listed for the department, ARS 27- 102- 1, is as
follows: " Aid in the promotion and development of the mineral resources
of the state." There is nothing in this duty, nor in the other 12 duties
that states the department shall start up mines nor is there any time table
or regulations that require a mine to start operations after we have assisted
a prospector, small miner, explorationist or others. A start up of a mine
is the function of the capitalist.
The department's duty is to provide what information we have, plus the engi-neer's
technical expertise to the prospector/ developer or interested party.
The prospector/ developer integrates this data and technical expertise with
other information he has collected and then decides how to proceed further.
He may decide to drop all interest or continue to develop the property via
one of several possible avenues. Whatever the outcome, the department has
assisted or aided the developer in malcing a decision, which is the depart-ment's
It is interesting to point out that many of the major exploration companies
believe at least 1,000 properties must be investigated before one property
can be put into production. In the May 25, 1984 issue of the North herican
Gold Mining Industry - N- e ws, an Englewood, Colorado company was quoted on this
subject. ~ oidsil Mining and Milling Inc., told as follows, " In all, over
1,000 prospective areas were originally visited by Goldsil prospecting teams,
and by- further geologic evaluation and library and literature searches, the
ori- g inal prospects were reduced to the 33 ERG p- roperties. The entire ex-ploration
program lasted five years." A geologist with the company told
the department that possibly five of the 33 propertries may become producers.
One of these properties is in Arizona, 6 miles north of Sun City. Shaft
sinking and mill acquisition have started on this property and production
is expected by the end of 1984.
To sum up, the greatest opportunity for the modern prospector is to follow
development of new concepts, techniques, mineral demand and pricing structures
that will allow him to re- evaluate areas previously prospected by the old
timers. Years ago there was no market for many of todays usable minerals,
transportation was inadequate, mechanized equipment and technology for de-velopment
and treatment of ores was lacking. With changes in technology
and new interpretations, prospected areas and targets rejected in- one period
can now be reconsidered.
Today, prospecting is incremental. One person or exploration activity pro-duces
information on a property. But that data may not be sufficiently en-couraging
to continue. We encourage development work on a claim or prospect,
and recommend filing of data with the department, This maintains a continuity
of information and assists our engineers in developing recommended prospects
for further work. Later a second individual or company may then take a look
at the claim or prospect. His interest is encouraged by new interpretations
of existing data or perhaps changing economic conditions. He does additional
Summary Cont. - 2-
work. Most often many separate investigations and considerable work occur
on the same property over a period of years before sufficient data is
accumulated to justify a hundred thousand, million dollar, or greater
expenditure. It is the data collected from " incremental prospecting"
coupled with expertise of education, training and experience, of our engineers
that provides encouragement and assistance to the prospector and explorationist.
We often do not know if our assistance is an initiating, encouraging or final
determination of the prospecting or development stage. a
The director of the department, by statute, must provide the Board of Governors
with a quarterly report. This report must contain a comprehensive survey
of the activities of the department including a complete financial statement
and shall contain other matters the board requires. These reports reflect,
substantiated by statistics, how busy the department employees were and how
extensive their knowledge of many subjects must be. In addition, they indicate 4
the large number of people coming in from out of state to spend money on Arizona
mineral resources and Arizona's mineral resource potential.
As an example, the quarterly reports provide the following accumulated yearly
statistics: 3,904 office visitors came in requiring assistance. It was spe-cifically
noted that there were 315 visitors representing 93 states ( accumu- a
lations) other than Arizona ( many more were not noted), 94 reports were written,
the technical staff discussed 902 different mineral properties with prospectors,
2,445 mine files were studied and researched by the public, 700 people were
provided with specific field trip information on rock hounding, 696 mineral
identifications were made, 162 field conferences were held with prospector-small
miners and others, and engineers made 212 mine visits. Apparently none 4
of these positive activites were taken into consideration during this audit.
These activities have been increasing substantially the last several years.
This increasingly demanding work load has been reflected in our budget request
by asking for additional resources in order to keep some semblence of order
in our daily activities. We have had to continue to operate with such limited
resources, spread more and more over increasing demands for services. The ( I
end result was the establishing of priorities and permitting output to be
reduced in certain activities in order to continue to serve the public. Of
course, the end result was not being able to accomplish all work originally
One of the major flaws of the audit appears to be the almost complete lack
of contact with the Board of Governors. The Board of Governors, by statute,
formulates the program and policies of the department. The senior member
of our board volunteered to meet with the audit team in order to help educate
the team on the agency, its operations and how the agency is able to get so
much done with such limited resources. He also offered to educate the audit
team on functions and needs of the mineral industry. This member spent over *
45 years in the business. This particular board member resides a 4- 5 hour
drive from Phoenix and never submits his travel or per diem when traveling
on business related to the department. All board members offered their
assistance to the audit team but there was no response from the audit group
to their offers. This in our opinion, was a serious oversight. d
Relating to statuatory duties and the footnote on Page 1, we want to point
out that work began on reviewing the agency's statuatory duties in early 1982,
almost two years before the audit began. The proposed bill was written and
accepted for sponsorship by legislators before there was any knowledge of
the audit beginning. The audit had nothing to do with this legislation in
anyway and in no way was the audit or notice thereof, any part of the reason
for changing the enabling legislation.
Item No. 1 under Statuatory Duties, is in error. It should read "- aid in the
~ romotion and development of the mineral resources of the state." With reference
to Item 2, there were 21,050 new mining claims located in 1983 with assessment
work being recorded on an additional 147,607 mining claims, resulting in 168,657
total active claims in Arizona. There is no way, with our limited resources,
we could monitor this large number. If minimum assessment work is done for
these claims in 1984, it will require the expenditure of $ 16,865,700 just
to keep possession of the claims.
On Page 2, first paragraph, Item 2, we provide technical assistance 2 s personal
assistance. In the second paragraph, the comments on the change in the number
of producing mines should include other problems of the small miner such as
absence of custom smelters, high freight rates and penalties applied to small
shipments with too much moisture, alumina content and other specific minerals
regarded as contaminants. These are some of the problems we are constantly
monitoring. Additionally, however, they also reflect a change in criteria
used to count producing mines. Intermittent and pilot operations even if they
have some production are rarely included now in counting producing or active
The department does provide assistance to small mine operators but the emphasis
on them is the auditor's not ours. We also assist the prospector and explor-ationist.
If one were to examine the membership of the small mine operator
associations then and now, one would find that many were and are prospectors
and explorers not mine operators.
Under Mineral Xuseum, third paragraph, Page 2, the last sentence is backward.
We loan to other museums for display. We do not display exhibits from other
museums. We also loan to schools, libraries and other groups.
On Page 3, first paragraph, mention is made of field offices. Lack of funding
has prevented reopening the field offices after IJWII. Mineral promotion should
operate just like agriculture, through extension services out in the pertinent
The comments on the Board of Governors in the second paragraph of Page 3
should include that the board establishes field offices it deems necessary,
prescribes the number of field and office assistants, formulates the programs
and policies plus numerous other functions.
On Page 4, last paragraph, we consider the lack of contact with the Board
to be a serious flaw in the audit.
- 4-
On Page 5, Item 2, it is stated the department has failed to perform some
statuatory duties. This is true. There are 13 statuatory duties. No's 4,
10, and 12 are not being fulfilled. No. 4 is to list and describe mining
properties. With 168,657 active claims in 1983, this has become an impossible
job with no or very limited resources. No. 10 is to send problems to the •
Bureau of Mineral Technology which department field work shows to be within
the scope of the activities of the Bureau. Since the Bureau has not been
staffed for this function for several years, the department engineers have
had to broaden and expand their range of expertise in order to serve those
requiring metallurgical assistance. Item 12 is to oppose Congressional acts
favoring reciprocal or duty- free imports of foreign materials.
On Page 6, second paragraph, mention is made of mine files and mine visits.
We gather every bit of information we can find and record it for filing in
a mine file. Mine visits are productive. There has never been a mine visit
made without some information brought backthat somehow or someday will be
of value. There is nothing in our statuatory duties that state we will de-velop
and maintain mine files. However, they are a very valuable tool and
the activity is maintained at all times.
On Page 7, No. 8, relating to the changes in the department's enabling legis-lation,
one of the main objects was to provide the department with a definite
objective and spell out procedures to achieve its objective. It made official ( I
many of the activities the department is directly doing, including mine files,
an official technical library, underground mine map repository, plus other
duties. At the bottom of the page the statement " investigate problems of
small mine operators to assist in development and problem solving" is not
quite correct. It should read " conduct studies of the economic problems of
prospectors and operators of small mines for the purpose of assisting in their 1
solutions and investigate properties to assist in development."
Nothing in the new legislation provides this department with the duty of starting
up mines or increasing employment.
Page 9 The department has met all of the statuatory duties except three.
They are as follows:
No. 4. List and describe mining properties. With 168,657 active claims
in 1983, this has become an impossible job with no or very limited re-.
No. 10. To send to the Bureau of Mineral Technology, problems which
department field work shows to be within the scope of the activities
of the Bureau. Since the bureau has not been staffed' for this function
for several years, the department engineers have had to broaden and
expand their range of expertise in order to serve those requiring
metallurgical assistance.
Item 12. To oppose Congressional acts favoring reciprocal or duty- free
imports of foreign material.
Second paragraph. Internally established goals and activities were set based
on certain levels of demands for the department's services determined by past
requests. When requests began to more than double, with no increase in resources
available, internally directed priorities had to be established in order to
be most productive with the least amount of resources. This resulted in
having to either eliminate or greatly reduce the output expected from some
activities. However, there would be a corresponding increase in the output
from other activities. This was all internally directed and in the interest
of best productivity and serving the maximum numbers of the public interested
in Arizona's mineral resources.
The economic benefits of the activities of the department can be demonstrated
by the known expenditures of some prospectors requiring assistance from the
department. Hundreds of thousands of dollars were spent on motels, restaurants,
car rentals, truck sales, mining equipment leased or purchased, operating
supplies, consultants hired, drilling, trucking and mining contractors hired,
assessment work done on claims and other miscellaneous requirements, personal
and recreational.
Page 10 The original request for case histories was for five or six more.
The 3 years just showed up at the last minute when time did not permit the
gathering of data. However, the data was always available in the files, open
to anyone including the general public and the audit team.
We do want to call attention to the error in case 1 about the department assisting
an individual locate claims. this is NOT true. We will teach how but not
assist anyone in doing claim location work. The company can have basalt claims
of their own if they so desire. We located a deposit for them and took them
to the site to do their own location work whenever they so want. We thought
it had been done.
The audit team's interpretation of the case studies is an excellent example
of tryingto bias an opinion by omission of positive facts. These eliminated
positive facts are the confirmed indi~. ations of the economic benefit, in dollars,
- continued-
Finding 1 Cont.
to the state of Arizona. In addition, considerable new data was obtained
on one of the state's natural resources. This is of prime importance.
In Case 1, the dollar expenditures went to motels ( 5+ weeks in Holiday Inn),
54 weeks of truck/ car rental, restaurants, mining consultants in Scottsdale
hired to locate 14 mining claims, consultant then puton a retainer to supervise
mining test load of basalt ( 3,000,000 lb), mining contractor hired to drill •
and blast, trucking contractor hired to load and haul, contractor hired to
crush material with final product being paid for. It is interesting to note
that the prospector- developer lived in West Virginia. He telephoned the
Department office and talked to an engineer. He was encouraged to come to
Arizona and prospect for minerals.
In Case 3, Page 11, $ 175,000 was spent on the project, located in Santa Cruz
County. Three local laborers, a local geologist, local aerial photographic
services company and a drilling contractor were all used. Proven reserves
were developed. Accoring to the company, the proven reserves were too small
for their corporate objectives. They do believe it is of sufficient size
that it could make a very good small mine. This increase in knowledge of
Arizona's mineral resources is very valuable and should result in a small
mine start- up in the future.
Case 5, page 12 resulted in an expenditure of over $ 50,000 mostly spent in
the area. An additional $ 1.6 million will be spent to get into production.
Page 12 The last sentence is not that applicable. Hundreds of thousands
of dollars have been spent promoting or developing mineral resources of Arizona.
Our charge is to aid in the activity, not start up mines. We all hope the
end product is eventually an active mine.
Page 14 We believe the department has demonstrated its effectiveness in its ( I
first statuatory duty, " To aid in- the promotion and development of the mineral
resources of the state." We believe the audit group is confusing aid in the
promotion with the actual start- up of mines, which of course, is not the
duty of the department nor is it funded for that activity.
What is a true " mineral resource survey"? A good productive survey requires
geologists, geologic survey, drilling, mapping, sampling, plus people and
resources for research and travel. Again, priorities were established to
provide what we believed was the most needed. Programs developed for certain
seminars resulted from a survey of resource data needs even though they were
not put in report form. Our conclusion on cobalt and titanium was based on
existing knowledge. Prospecting and exploration is an incremental activity.
As time passes, more knowledge is gained, more reports written, economic
conditions change, so it is possible any decision today could easily be wrong
a few years from now. One of the most important surveys we could make right
now would be on silver. However, this would take at least one man year of
work. It would require investigation of various types of ores such as silver,
silver- lead, silver- zinc, silver- copper, silver- copper- lead- zinc. plus others. ( I
Perhaps more than 1500 occurrences would have to be investigated - we need
sufficient resources of staff and funds.
Finding 1 Cont.
It is quite likely that an information circular can be of more help when
prospecting for certain minerals than a very large mineral report could be.
The thickness or outside appearance does not necessarily mean quality. The
budget of agencies in other states should be investigated before comparisons
are made between our publications or activities and other states.
As an example, the 1982- 1983 budget for the California Division of Mines and
Geology is $ 2,910,000 and it employs 53 people. The New Mexico Bureau of
Mines has a budget of over $ 1,500,000. The Nevada Bureau of Mines has over
21 fulltime plus three part- time employes plus central office printing. Their
budget is $ 780,000.
We have for many years been extremely short of funds for printing. In fact,
we were limited to a few hundred dollars for paper. This resulted in our
typing stencils, mimeographing and collating our publications in- house. What
a large waste of our employees time when there are many private sector printing
shops available. Even though we sold the publications we were not permitted
to keep the funds and purchase additional paper. These two facts tended to
place lower priority on projects that were time consuming and costly in relation-ship
to our appropriation, personnel and providing other services.
Our records indicate the following publications sold: 1980 - 2,084; 1981 - 2,291;
1982 - 1,141; 1983 - 627, and 1,585 for the first nine months of 1984. We
are disseminating our publications. The decrease was due to lack of printing
funds. This has picked up again this year. In addition, we were doing an
excellent job disseminating mineral data through seminars and conferences.
A number of publicaitons are provided at no charge to certain organizations
and educational institutions. Some are provided for good will. In the late
1982- 1983 era when we were out of a publication, private industry printed
( with our permission) our major publication and sold it until we were able
to re- print it ourselves. We publish and disseminate - agreed not enough -
but as much as our limited resources will permit.
Page 15 The Mineral Industry Location System ( MILS) was a project initiated
by the department and completed with Federal funds. Rather than employ additional
help which would cause problems when Federal funds were spent, the department
employed contract labor. The end result was basic data for over 10,000 mine
files with perhaps as many as 5,000 being duplicates of those already established.
The project was to research and obtain data on all miaeral occurrences we
could locate within the time frame and grant funds. Attempts were made to
obtain, for each occurrence, name of operation, commodities involved, current
status, type of operation, latitude, longitude, Public Land Survey description,
elevation, name of LSGS quadrangle map, available domain, river basin, sources
of information, MSHA identification number, name and date of last owner if
known, plus other data. All this data was coded for input to the U. S. Bureau
of Mines computer in Denver. We obtained computer printouts of each occurrence.
At this time we have not had the staff or time to completely integrate the
system into the existing mine file system. Each of the computer printouts
is a mine file, to be expanded as more data develops.
Finding I Cont.
It would be helpful to have the Auditor General's definition of " serve as
a Bureau of Mining Information". The department provides public speakers,
media information ( written and elecronic), seminars, programs and lectures
for organizations, mineral identification, response to " Answer Line", and
public library requests and provides data on state mining activity to state
and national legislators and the rest of the public. Perhaps he is confusing
prospecting and exploration with mining. In the past two or three years we
have added over 1200 mine files to our library plus over 300 books.
According to the acting director of the Minerals Division of the State Land
Department, his list of known mineral occurrences on state land total six
( 6). He took them from one book. He stated they are trying to obtain computer
terminals in their offices. When they do they will use a computer list of
the MILS occurrences. The Department of Mineral Resources obtained a microfilm
print of all the MILS data for the State Land Department at no cost to the
state. We discuss minerals on state lands with prospectors and developers.
We add data to the mine files on state lands and we publish the laws on regu-lations
regarding mineral rights on state lands separate from State Land
Department total regulations. We do this as a service to the Minerals Division
of the State Land Department ( since they are not permitted to do this.) A
check with recently retired members of that division would reveal a cooperation
and a use of our files for their work.
Page 16 In 1981 the department's Directory of Exploration Companies listed
51 companies with full- time offices in Arizona, 39 of which were in Tucson.
Our 1983 Directory reflected the effect of the recession in base metal activity.
There were only 31 companies listed with 22 of them located in Tucson. This
is a good example of how the department had to re- establish its priorities.
Admittedly there was a failure to immediately re- write one of the standards
on some engineer's PP& E's. However, the activity was controlled by the director a
and was completely aware of the changes at the time of evaluation.
We will welcome the audit group's providing us with the names of the exploration
companies willing to provide the department with specific information on their
exploration program. We obtain general information all the time. It is not
a problem but we will require specific proprietary data. Perhaps the audit
team misinterpreted the amount, value and type of data companies are willing
to supply.
Page 17 There were 212 properties visited in 1982- 1983 fiscal year; seventy-one
( 71) specific mine reports written ( plus numerous additions of data for
the files); 123 new mine files made; 3,964 office visitors; 15,217 telephone
contacts. Engineer- discussed 889 claims or minerals occurrences ( or mine
files) with an additional 2,392 studies by an unidentified number of the public.
These figures came from the quarterly report to the Board of Governors.
In 1982- 82, statistics show there were 270 properties visited and 244 reports
written. New mine files totaled 104.
Finding I Cont.
Pages 17 & 18 The examples shown as " typical entries in the weekly reports"
are in no way- ty- p- i cal. This part of the auditor's report is a classic ex-ample
of trying to convey a negative conclusion based on omission of facts.
The auditor overlooked themainpurpose of the field visit from which the
first three items were taken. The main purpose was to visit the Vekol Mine
which was preparing to go into production. A " Mine Report" on the Vekol
Mine was made as a result of this visit. The mine report included owner-ship,
lessor- operator, mill equipment, metallurgical process to pelletize
and avoid channeling of leach solution, capacities, manpower and plans for
both open pit and underground operation.
The three entries mentioned as being typical were as follows:
1. " Visited the Christmas Gift mine ... no evidence of activity."
2. " Visited the Orizaba mine ... no recent activity in evidence. I I
3. " Visited the Jackrabbit mine ... no evidence of activity."
Also included in the same report, so carefully overlooked, in addition to
the full mine report, was operational data on the North Star mine, ownership
changes on Goodwin mine plus metallurgical testing ( some gold recovery) of
ores, drilling, geophysical plans, plus a reported change of ownership on
Banner mine with some metalurgical data, plus information about the proposal
to purchase the Spar mill at Punkin Center. This mill could function as a
much needed custom mill.
11 The fourth item mentioned - visited an old mill site and large dump ...
cannot find it in MILS or on any map." This came from a weekly report over
one page long. The purpose of this field trip that week was to visit some
large proposed gold operations near Yuma and some placer mine operations in
La Paz County. Three mines were visited that resulted in 3 mine reports.
In addition to three mine reports, other data in the weekly report was put
into the mine files directly without a separate report being written. Data
on trommel and sluice operation recovering gold nuggets ( they were wanting
buyers); Gold Dome mine closed three offices; status report on Clip mill
being erected and availability of the Gold Nugget Claim. This is the weekly
report the audit states as being lacking in detail and reason for visits.
The one 2- line quote taken from a one and one third page report that in-cluded
an additional three mine reports cannot be considered typical.
To the layman it may appear frivolous to state that a property was visited
and that there was " no evidence of recent activity" but to the exploration
geologist or land- man such information for a particular date can be of great
value. We are frequently asked what has been happening at a property and
if we can go to the file and find the comment that as of a certain date
nothing was happening my answer is much more valuable than " I don't know,
we have no information since 1946." We strongly feel that it would be a
disservice to the taxpayers and a dereliction of our duties to adopt tunnel
vision when going to a property and ignore everything else around us.
Finding I continued
Page 18 Contact with established ore buyers and potential ore buyers is
maintained on a continuing basis. Contact by telephone or personal visit
is made based on four criteria: ( 1) change in economic condition of the
particular commodity ( 2) change or reported change in the operating status
of a particular buyer or processor ( 3) request for specific marketing help
from a producer or potential producer ( 4) recognition of the need for
marketing data updates by the department engineers related to the state's
potential to produce a particular commodity under current conditions.
Frequent contact is maintained with two major in- state bu
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