Finance Committee

Wednesday, 9:00 a.m., May 29, 2002

Commission Hearing Room
4200 Smith School Road
Austin, TX 78744
Item
No.
Subject Public Hearing
Agenda Item No.
  Approval of the Committee Minutes from the previous meeting.  
  Summary of Minutes  
1. Chairman's Charges (Oral Presentation) Committee Only
2. Bomer Report Update
Staff: Bob Cook
Committee Only
3.

Financial Review and Update
Staff: Suzy Whittenton

Committee Only
4. Revenue Estimating Methodology
Staff: Suzy Whittenton

Committee Only

5. Nonprofit Partners Resolution
Staff: Susan Harris, Page Campbell
5
6. Point-of-Sale Update and License Legibility Rules
Staff: Suzy Whittenton
Committee Only
7. TPWD Facility Transfer – Port Lavaca
Staff: Walt Dabney
8
8. Other Business  

Summary of Minutes
Texas Parks and Wildlife Commission
Finance Committee
April 3, 2002

BE IT REMEMBERED that heretofore on the 3rd day of April 2002, there came to be heard matters under the regulatory authority of the Parks and Wildlife Commission of Texas, in the commission hearing room of the Texas Parks and Wildlife Headquarters complex, Austin, Travis County, Texas beginning at 9:20 a.m., to-wit:

I. FINANCE COMMITTEE:

Ernest Angelo, Jr., Chair
Phillip Montgomery, III
Katharine Armstrong Idsal
John Avila, Jr.
Lee M. Bass, Chairman-Emeritus
Joseph Fitzsimons
Alvin L. Henry (absent)
Donato D. Ramos
Kelly M. Rising
Mark E. Watson, Jr.

II. OPENING STATEMENT: Chairman Katharine Armstrong Idsal called the meeting to order.

III. APPROVAL OF MINUTES: Commissioner Ernest Angelo, Jr. asked for a motion to approve the minutes from the January 16, 2002 meeting. The motion was moved by Chairman Katharine Armstrong Idsal and seconded by Commissioner Joseph Fitzsimons. The motion passed unanimously.

IV. THE FOLLOWING ITEMS WERE PRESENTED TO THE COMMITTEE:

1. Chairman’s Charges

Presenter: Mr. Robert L. Cook

Mr. Cook updated the Commission on the status of the Chairman’s Charges for the Finance Committee. One of the Charges was to identify and assess nonprofit organizations that partner with the Department and establish an official nonprofit partner. This item will be covered in Item 7 of the Regulations Committee. Staff will propose a Commission policy amendment that names the Parks and Wildlife Foundation of Texas as the Department’s official nonprofit partner. Another charge was to adjust rates charged for licenses and commercial fisheries programs to provide funds necessary to recoup all Department costs associated with the management of each program. Staff published the proposed fee increases in the Texas Register for public comment. Item 9 of the Finance Committee will ask for adoption of proposed fee increases of approximately 20 percent, which represents a gradual approach to reaching full cost recovery.

Finally, we were to review and implement appropriate State Auditor’s Office audit recommendations. We have addressed or are in the process of addressing most of their recommendations. In addition, the Department contracted with Mr. Elton Bomer and his management team to review and assess the Department’s business practices, operations, organizational structure, and to develop recommendations to address the findings of the State Auditor’s Office. Mr. Bomer will present a summary of his findings and recommendations to the Commission.

2. Bomer Management Review

Presenter: Mr. Elton Bomer

Mr. Bomer stated that the Department carries out its mission very well and is doing a good job planning for future generations. The Business Practices Evaluation concentrates mostly on financials – financial controls, budget development, revenue collection practices, and the State Auditor’s Office Report of 2001. It also suggests management structure rearrangement for consideration.

In addition to the SAO Report of 2001, they also reviewed prior audits made by the SAO (1995, 1996, 1998 and 1999) that deal with management controls, the state park system and the catalog. The team also reviewed several internal audits. The current organization is decentralized in that each division operates like a small company.

With respect to the financial management issues, Mr. Bomer and his management team examined the issues in the 2001 SAO report and discussed the matter in detail with the SAO staff. They looked at revenue reconciliation -- making sure that we could reconcile the entries with respect to the internal financial system to the statewide accounting system. The Department also hired four part-time staff to assist with the reconciliation process. The number of lines to be reconciled has gone down significantly. It was also noted that the Department has 180 bank accounts, some of which have excessive charges. In come cases we may need to look at having small parks or parks located in remote locations send their deposits to Austin for processing. Mr. Bomer suggested that the bank accounts be reconciled and the number of accounts be reduced. Other items that need to be reconciled are the expenditures, advance travel, petty cash and the value of state property. Also, in 1998-1999 approximately $539,000 of general revenue funds was lapsed. Controls are now in place to ensure that additional money isn’t lapsed in the future.

For a short period of time, if you purchased a hunting or fishing license in addition to other items in a state park and paid by credit card then the funds from the purchase were deposited into Fund 64 and not split funded between Fund 9 and Fund 64. It is estimated that $257,000 needs to be transferred from Fund 64 to Fund 9 to correct the transactions.

When asked if Mr. Bomer feels that adequate internal controls and procedures are available to staff to prevent the type of problems that have occurred and to implement steps to ensure that they don’t happen again, Mr. Bomer replied that he thinks that recommendations have been made to improve some of the controls and that staff are already working to implement them.

The Department heeded the Governor’s desire and trimmed $7.2 million in the operating budget balance that was largely unencumbered. Some of it was obligated, but largely it was unencumbered.

In relation to long-term projects, the Department has a great project plan in place which itemizes each project, the projected expenditures by biennium, the need for the project, and the estimated shortfall of funds. Mr. Bomer and his management team suggested that no new projects be added to the list for a while.

Mr. Bomer also stated that he feels that the Department needs to start emphasizing to the Legislature the need for some additional general revenue in the future to take care of State parks. Millions of people enjoy the parks and we simply can’t charge enough fees to take care of our parks efficiently. The Department should use the economic multiplier effect to sell the Legislature the idea of the development of economic enterprise. Our State ranks 49th in the country with respect to per capita spending on parks.

The Department has a very complex budget and presenting it can be challenging. Staff from the Legislative Budget Board assisted TPW staff to determine a way to present its budget in a less confusing format.

With respect to the organizational changes and the proposed organizational chart, instead of making this look like ten separate companies with the Executive Director as the president, Mr. Bomer and his management team suggested a more vertical organizational structure. They suggested that the Executive Director have two deputies report to him – Deputy of Programs and Deputy for Administration. The divisions would be divided into those two categories and would report directly to a deputy. Inland and Coastal Fisheries divisions would report directly to the Deputy of Programs instead of through the Resource Protection Division. It was also suggested that the Department hire a general counsel which would report directly to the Executive Director as well. Another suggestion was to have the internal auditor report directly to the Commission instead of the Executive Director, so that the Commission is kept apprised of any issues.

Mr. Bomer noted that the Department’s budget area is lacking the staff it needs to do its job properly. The Department has 4 budget staff as compared to comparable agencies which have approximately 15 budget staff. It is highly suggested to move staff into the budget area to assist with the workload. It was also suggested that the Department hire a Federal Funds Coordinator to seek Federal funds and to keep up with the status of federal grants that the agency receives. Mr. Bomer stated that he doesn’t foresee any net increase of FTE’s; we just need to look at transferring people into the areas where we need more help. In addition to these changes, the Executive Director is proposing to transfer 25% to 30% of headquarters personnel into the field. He will also propose increasing the number of game wardens to about 525. These proposals are supported by the Bomer Management Team.

There are a few items that could be implemented that would gain additional credibility to the Department. The Department has a good reputation with its customers and constituents; however that could be improved if we offered the public a 1-800 number to call to make state park reservations. Mr. Cook is aware of this and discussions are taking place to deal with this issue, in addition to exploring the option of on-line purchases of hunting and fishing licenses. The Legislature perceives that our vehicles are not utilized efficiently. It was suggested that we substantially reduce the number of vehicles at headquarters by transferring vehicles that aren’t being utilized efficiently to the field and create a motor pool at the headquarters complex.

Other items that need to be reviewed are some of the contracts that the Department has entered into. The Department’s contract with Texas Monthly needs to be reviewed and possibly revised. The Chairman and the Attorney General’s Office are currently negotiating with Texas Monthly on this. With respect to the catalog, a good decision was made in 1999 to privatize it. However, the Department only received approximately $38,000 a year from the proceeds. The Department needs to renegotiate the contract to include other advantages or discontinue the catalog business altogether when the contract expires.

In order to prepare for the upcoming Legislative session, the above recommendations should be implemented.

The Department has many strengths, too numerous to mention. In general, the Department has a good reputation; they just have to regain some of the credibility previously lost with the Legislature. The Department’s biggest hurdle in the upcoming Legislative session is regaining its credibility which they have already begun working to improve.

3. Financial Review and Update

Presenter: Ms. Suzy Whittenton

Ms. Whittenton gave a financial review for FY02. In account 9, we sold approximately 2.3 million licenses, stamps, and permits as of February 28, 2002. This is up almost 2% over this time last year. Super combo sales are up 6.5% when compared to last year. We have seen significant increases in sales of the senior supercombo and the senior combo licenses. We have sold just over a million hunting licenses this year. Fishing license sales are up over 5% when compared to the prior year, and we have sold over one million fishing licenses as well. As of February 28, 2002, with 50% of the fiscal year remaining, we have collected 68% of the estimated revenue from license sales. Our revenue estimate for FY02 is 1.4% higher than last year’s actual revenue. We believe we will meet the revenue estimate since revenue was up 3% when compared to the same period last year.

Boat revenue was up by 4% as of February 28, 2002 when compared to prior year. We have currently collected 28% of the estimated revenue from boat registration and titling fees, but the bulk of our revenue for boats is usually generated in the coming months. The State Controller’s revenue estimate for boat fees is $14.8 million, which is approximately 6.5% higher than last year’s actual revenue. We estimate having $8 million left over in Fund 9 at the end of FY02 which will be used to fund next year’s operating budget.

State park revenue is estimated at $27.6 million. For the period of September through February we have collected 37% of that estimate. Revenue is up nearly 18% over last year as of February 28, 2002. Historically we collect most of our park revenue between March and August. As of February, which is halfway through our fiscal year, we’ve encumbered/spent 48% of our operating budget. We estimate ending the fiscal year with a $700,000 balance at the end of FY02 in Fund 64.

We have already begun our FY03 budget process. We are currently working on our Strategic Plan which is due in July. The strategic plan directly ties to our Legislative Appropriations Request (LAR) which is due in August. The LAR is the document required to request appropriation authority for FY 04-05.

In regards to the status of addressing the State Auditor’s Office findings, the auditors noted weaknesses in the management of the Transactive system. Most of the issues identified have been addressed in the new WorldCom system which we began using in January 2002. PricewaterhouseCoopers was hired to review the old system, but since we didn’t have a legal remedy to collect any funds due from Transactive, it was decided to have PricewaterhouseCoopers shift their focus to the new WorldCom system to ensure that proper controls were in place as suggested in the audit. Another finding dealt with the three-day deposit rule. We submitted a letter to the Controller and the State Auditor’s Office asking for a waiver to the rule. We currently have a contract with our license deputies to sweep their accounts once a week; however, as we renew those contracts we will consider revising them. Another issue was the issue of allocating super combo revenue to stamp funds. The Wildlife Division is collecting data to support a change in our current methodology. As far as issues identified in the mailroom, staff has begun opening all incoming mail and we are looking at redesigning some of our mailroom processes. We have hired an employee to assist with process redesign in the cashier’s area, boat area and also in the mailroom. The reconciliation issue is the biggest issue. We have hired temporary staff to assist with the backlog. Significant progress has been made and once we clear the backlog then the reconciliation will be done monthly. We have also developed and documented our revenue forecasting methodology as requested by the State Auditor’s Office. We will begin developing the revenue estimates for FY04-05 soon and we will work with the Controller’s revenue estimators on those estimates. Another item we are working on is the automated systems interfaces that will interface all of our accounting and revenue systems together. This issue is part of our non-value added process noted by the State Auditor’s Office. This will be very complex and time consuming to implement; however we have established a timeline for the process.

4. Foreign Travel

Presenter: Ms. Suzy Whittenton

Ms. Whittenton presented information regarding foreign travel and asked for guidance from the Commission in establishing a policy. The General Appropriations Act states that the Commission must approve, in advance, expenses for travel to foreign countries other than Mexico or Canada. Staff recommended that the Commission delegate the Executive Director the authority to approve foreign travel in cases where other entities were paying all expenses except for the staff’s time. All other foreign travel in which TPW would incur expenses would have to be preapproved by the Commission.

5. Local Parks Grants Update

Presenter: Tim Hogsett

As requested, Mr. Hogsett briefed the Commission on how the grant programs operate under the Texas Recreation Parks Accounts. The grant programs include the outdoor recreation grants to local governments, indoor recreation facilities grants to local governments, the community outdoor outreach program grants for local governments and nonprofits and the regional park grant and small communities grant programs. The money for these programs is a dedicated from a portion of the sales tax collected on sporting goods. The amount we receive is currently capped by the Legislature at $15.5 million. We are also appropriated the interest earned on the funds which typically is $4 to $5 million annually. The Commission has the authority under the Parks and Wildlife Code, Chapter 24, to make rules to administer this program which includes administrative procedures, the scoring system that we use to evaluate projects and all other items related to general administration and payment from the program. The only mandates are for outreach grants at $1.25 million and indoor recreation grants at $3.2 million. The others are discretionary in terms of the amount allocated to the various program. This does not include a couple of million dollars a year which has been appropriated to us for consideration of facility transfers. Mr. Hogsett noted that they usually review the application process about every five years and they will begin that process again soon. The Commission will be given the opportunity to provide input into the new process. In particular the Commission would like to see the types of projects that relate more to our mission get additional points in the scoring system. Mr. Hogsett also discussed some of the projects that have benefited from the grants we awarded in the past.

6. Urban Park and Recreation Recovery Program

Presenter: Mr. Tim Hogsett

The Urban Park and Recreation Recovery Program is a grant program administered by the U.S. Department of Interior National Park Service. These grants are federal pass-through grants that primarily provide for rehabilitation of parks and recreation activities in the inner cities. The State’s role in this is that there is an incentive in the federal grant evaluation criteria that if a state cooperates in providing a part of that, between 70% and 80% match to reduce the amount of the local match, then additional criteria points will be awarded to those sponsors. Traditionally, the Commission has authorized the use of part of the Texas Recreation and Parks Account resources for the match of any projects that might be approved for UPARR grants in the State of Texas. There is almost $29 million in the national competition and Texas communities are eligible for approximately $4.3 million of that amount. Applications are submitted to the National Park Service to review and see if TPW or the State of Texas has made a commitment of part of the match. TPW usually puts 10% of the amount aside for matching, but if the money isn’t utilized then it is put back into the Texas Recreational Parks Account. Mr. Hogsett stated that the staff will suggest that the Commission authorize setting aside $433,500 for the match program. The Commission approved moving the item to the Thursday Commission meeting agenda for public comments and action.

7. Lake Rita Blanca State Park Transfer

Presenter: Walt Dabney

Mr. Dabney stated that we have been in negotiations with the City of Dalhart regarding transferring Lake Rita Blanca State Park to them as authorized by the Commission at the last meeting. Lake Rita Blanca State Park is the northernmost state park in Texas and it hasn’t been developed. We have had the 1,668 acre park since 1990 in a 101-year lease. The property was owned by the county, but we had it leased. House Bill 2108 authorized the Department to look at the possibility of transfers to a subdivision of the State and we have $2 million available each year for this purpose. The grants would be based on the proposal and a request from the governing body that they wanted to do that. Dalhart has submitted a proposal that we feel is acceptable at just under $400,000. It would create many opportunities for their community that relate to the mission of the Department. The money would come from the Texas Recreational and Parks Account. Staff will recommend that the Commission allow the Department to consummate the agreement. The Commission placed the item on Thursday’s Commission meeting agenda for public comment and action.

8. License System Update

Presenter: Ms. Jayna Burgdorf

Ms. Burgdorf provided an update on the WorldCom licensing system and its three phases. The first phase is the Transactive closeout and production. We have been in production with the new WorldCom system since December 2001. Transactive has picked up over 2,800 terminals to date, but has asked for assistance in obtaining potentially up to 150 more. TPW doesn't own the terminals, but we own the potential off-line sales that are inside the terminals. We are contracting with two former Transactive employees to extract these sales out of the terminal so that we can invoice the agents for any sales extracted. The cost of the contracts will be reimbursed by GTech, Transactive's parent company.

We have two high priority issues with the WorldCom system. They are agent management and some findings from the PricewaterhouseCoopers control review. Since January we have had an additional 150 agents sell licenses on the new system, which brings the total agents that have sold a license on the system to 1,857. We had approximately 2,400 agents on the Transactive system and 2,300 of those indicated that they wanted to participate in the new system. So far almost 2,000 agents have activated their equipment. In February, WorldCom called 856 agents and of those, 510 participated in a customer satisfaction survey. The survey indicated that many of the agents who haven't sold a license yet, haven't had a demand from customers while some were still having problems with the system. Other survey results generally revealed satisfaction by the agents. Those agents with problems are continuing to be served by the WorldCom Help Desk.

We held a License Deputy Advisory Committee meeting in February. The group is made up of small and large agents from across Texas. The focus of the meeting was the efficiency of the system. The group had a lot of suggestions that have been considered. The agents weren't concerned with accounting issues, which were issues with the Transactive system, but they did express concerns with having to do too many keystrokes per license transaction. We are working with WorldCom to handle these issues in Phase three.

We have conducted some agent training and we plan to extend that this summer before the new license year begins. Our Law Enforcement Division will join the license section in addressing issues related to the system and to regulations that have changed. This will also be an opportunity for the agents to ask questions they are asked by their customers.

PricewaterhouseCoopers was asked to redirect their review from the Transactive system to the WorldCom system. It is specifically related to transaction integrity. The two most important issues that they found in their testing were that the off-line limitations are not functioning as designed. The other issue is that there were gaps in transaction numbers. We believe that these gaps relate to training or aborted transactions. Our internal audit staff went to five stores and reviewed transactions over a two-month period and found no instances where live sales matched a gap in a transaction number. That means that we have found no instances where a sale was made in the field that didn't make it to the host system. All of the issues are being addressed by WorldCom.

Phase two of the license system implementation includes Internet licensing, bug fixes and finalization of administrative support applications. Phase two was scheduled to be complete at the end of April, but it is behind schedule and is expected to be complete in May. Phase three includes any enhancements that need to be made to the system. This Phase may require an amendment to the contract.

9. License Fees for Commercial Fisheries

Presenter: Ms. Suzy Whittenton

Ms. Whittenton noted that the Commission reviewed the proposal to increase commercial fishing licenses during the January Commission meeting. The State Auditor’s Office Report of December 2000 determined that TPW didn’t receive enough revenue to recoup the cost associated with managing the commercial fisheries program. That report became the basis for a Legislative Appropriations Rider in the current Appropriations Act which states that TPW shall adjust rates charged for licenses in each commercial fishery program accordingly to provide funds necessary to recoup costs. In order to reach complete cost recovery we would have to increase these fees by over 100%. This would be in addition to last year’s fee increase of approximately 50%. TPW staff were concerned about the socioeconomic disruption to the coastal communities from a large fee increase. In an effort to balance the interests of the State and the industries, a 20% fee increase was recommended. That action would expect to generate $663,000 in revenue. The fee proposal was published in the Texas Register and we held 22 public hearings in addition to accepting comments through our website. TPW staff wanted to clarify the rules associated with transfers of licenses when a license holder passes away and wants to transfer their license to an heir. It was determined that a $10 fee be charged in this situation instead of the full license fee that has been charged in the past. This item was placed on Thursday’s Commission agenda for public comment and action.

V. ADJOURNMENT: Commissioner Ernest Angelo, Jr. adjourned the Finance Committee.


Committee Agenda Item No. 1

Finance Committee
Chairman's Charges
May 2002

(This item will be an oral presentation.)


Committee Agenda Item No. 2
Presenter: Bob Cook

Finance Committee
Bomer Report Update
May 2002

I. Discussion: Staff will brief the Commission on the status of the implementation plan for the Bomer Management Report recommendations.


Committee Agenda Item No. 3
Presenter: Suzy Whittenton

Finance Committee
Financial Review and Update
May 2002

I. Discussion: Staff will present a financial review for the year to date FY2002, including an update on Account 9, Game, Fish and Water Safety and Account 64, State Parks. This presentation will focus on the sale of hunting and fishing licenses, boat registration and titling fees, and state park fees. Staff will also present preliminary budget information for FY2003.


Committee Agenda Item No. 4
Presenter: Suzy Whittenton

Finance Committee
Revenue Estimating Methodology
May 2002

I. Discussion: Staff will present proposed methodology for estimating revenues for the coming biennium (FY 04-05). The Business Practices Evaluation report by Elton Bomer recommended that the methodology be fully documented and presented to the Commission at its May 2002 meeting.


Committee Agenda Item No. 5
Presenter: Susan Harris, Page Campbell

Finance Committee
Nonprofit Partners Resolution
May 2002

(This is Public Hearing Agenda Item No. 5.)


Committee Agenda Item No. 6
Presenter: Suzy Whittenton

Finance Committee
Point of Sale Update and License Legibility Rules
May 2002

I. Discussion: Staff will update the Commission on the implementation of the new license system. The update will include information regarding the finalization of the system implementation as well as preparation for the new license year.

In addition, staff will brief the commission on proposed amendments to Title 31, Texas Administrative Code, Chapter 53, Finance that will add a new rule specifying standards for licenses, including legibility. The changes are required by provisions in Senate Bill 305 (TPW’s Sunset legislation). Staff will request permission to publish the proposed changes in the Texas Register for public comment.


Committee Agenda Item No. 7
Presenter: Walt Dabney

Finance Committee
TPWD Facility Transfer – Port Lavaca
May 2002

(This is Public Hearing Agenda Item No. 8.)


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