Finance Committee

Wednesday, 9:00 a.m., August 28, 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. FY03 Operating and Capital Budget and Texas Parks and Wildlife Investment Policy, Budget Policy
Staff: Suzy Whittenton
9
3.

Point of Sale Update
Staff: Suzy Whittenton

Committee Only
4. License Legibility Rules
Staff: Suzy Whittenton

10

5. Grants
- Local Park Fund Outdoor Recreation Grants
- Small Community Grants
- Regional Park Grants
- Recreational Trails Grants
-Target Range Grants
Staff: Tim Hogsett
4
5
6
7
8
6. Other Business  

Summary of Minutes
Texas Parks and Wildlife Commission
Finance Committee
May 29, 2002

BE IT REMEMBERED that heretofore on the 29th day of May 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 11:15 a.m., to-wit:

I. FINANCE COMMITTEE:

Ernest Angelo, Jr., Chair
Philip Montgomery, III
Katharine Armstrong Idsal
John Avila, Jr.
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: Chair Ernest Angelo, Jr. asked for a motion to approve the minutes from the April 2, 2002 meeting. The motion was moved by Commissioner Donator D. Ramos and seconded by Commissioner Philip Montgomery. The motion passed unanimously.

IV. THE FOLLOWING ITEMS WERE PRESENTED TO THE COMMITTEE FOR CONSIDERATION:

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. As required by Sunset, in Item 5 on today’s agenda you will be presented information for consideration and approval regarding nonprofit organizations that partner with the Department.

2. Boner Report Update

Presenter: Mr. Robert L. Cook

The Bomer Report will now be called the Business Practices Improvement Plan. TPW had already begun working on some of the issues outlined in the Business Practices Improvement Project prior to the arrival of the team and continued to work diligently during the time the Bomer team was onsite to make the necessary changes to deal with the issues. Since this is the Department’s number one focus at this time, I am going to give you an overview of what we have done since that time. The first thing we did was hire a member of the Bomer team, Mr. T.C. Mallett, to assist in the development of solutions. Then second, I requested Mr. Scott Boruff’s assistance in developing and implementing a plan to get this project done. The Bomer team also suggested that we need to increase staff in the Administrative Resources Division, hire and a deputy executive director for administration, deputy executive director for programs and a general counsel. I appointed Mr. Boruff as the Interim Deputy Executive Director for Administration and the position is currently advertised. We also have the general counsel position advertised. So that we can focus our efforts on filling these positions, we are going to wait to advertise the deputy executive director for programs. Ms. Suzy Whittenton and Mr. Boruff have put together an interdivisional team to address the issues identified in the Business Practices Improvement Project. Our primary focus is our financial management organization and process issues. We have hired six temporary employees to address the backlog of revenue and expenditure reconciliation. In addition, the Comptroller’s Office, upon our request, has loaned us two people to assist us at no charge. Our goal is to complete the revenue and expenditure reconciliations by August 31; however it will be a tough goal to achieve. Based on what staff are reporting, we will have the expenditure reconciliation completed by that time; however the revenue reconciliation is more difficult and may take some additional time. We also have a plan developed to support the summary level corrections in order to meet the deadlines.

Other personnel issues that relate directly to the Administrative Resources Division are being addressed. We have hired a new financial management director who will start in June. We have have a new director of budget and planning position posted and anticipate hiring in 60 days. We also have the license manager position posted and expect to hire that position within the next 30 days. Four other positions have also been posted – two systems analysts and two general ledger accountants. Three of those positions are new positions. In the Business Practices Improvement Plan there were comparisons given of agencies of comparable size and comparable complexities. We had two or three people in this particular area when most agencies our size had eight to ten in that group. So we are adding staff as needed to get the job done. In the boat registration and titling system that we are operating with, the State Auditor’s Office (SAO) felt we had nonvalue added processes. A specialist, Mr. Clovis Boatright, was hired to redesign this system. The long-term fix requires extensive programming and will be implemented as soon as the system can be completed. An interim workflow has been designed for use with the current automation and will be implemented June 3rd. It has been tested and will eliminate much of the nonvalue added processes identified by the SAO. We have been redesigning our mail room and our cashier’s office processes. We will be moving the incoming mail function closer to the revenue section.

As far as the revenue estimating methodology, Ms. Whittenton will present the methodology to you later today in order to make that process more open. In an attempt to improve communication with oversight agencies, staff are making weekly contact with the Legislative Budget Board and the SAO and we have been scheduled legislative briefings with all oversight agencies beginning June 11th.

The detailed project plan is complete and I receive progress reports weekly from Ms. Whittenton and Mr. Boruff. We are focusing our efforts on what we have prioritized as the top 30 issues. We have focused on this effort and we are dealing with this effort in our FY03 budget planning process. Some of these efforts require significant funding and we are dealing with that since we recognize the value and importance of it. We will report to you on this matter at every commission meeting and I will keep you updated every time we have the opportunity to talk.

It is my goal to be able to come to you at the November commission meeting and report to you that the majority of this effort has been completed; that whatever adjustments, corrections, additions were called for have been done. For the items that we don’t have done I want to be able to come to you and tell you our plan for dealing with them.

3. Financial Review and Update

Presenter: Ms. Suzy Whittenton

Ms. Whittenton gave a financial review for FY02. In account 9, we sold approximately 2.7 million licenses, stamps, and permits as of April 30, 2002. This is down .3% over this time last year. Super combo sales are up 7.8% when compared to last year. We have been selling more super combos and senior super combos while we have sold less straight resident and nonresident licenses. Hunting license sales are up .9% or less than 1%, and we have sold over one million hunting licenses this year. Fishing license sales are up 1% when compared to the prior year with combination licenses up and resident and nonresident down. The saltwater stamp sales are also down about 1 – 1 ½%; however when compared to prior year they were down 8%. Even though saltwater stamps are down, revenue is up due to the $3 increase. We have currently sold 1.3 million fishing licenses. As of April 30, 2002, 67% of the way through the fiscal year, we have collected 77% of the estimated revenue from license sales.

In the boat registration and titling area, most of our revenue comes from registrations. When we reviewed the last nine years of transactions we found that we register between 600,000 – 630,000 boats per year. As of the end of April 2002 we had registered about 621,000 boats this fiscal year. Our busiest months for boat registration are May through August. Boat revenue was up by 2% as of April 30, 2002 when compared to prior year. We have currently collected 49% 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. As of yesterday we had collected about 62% of the estimate, so it looks like it is coming in around what we expected. Currently registrations are up, but titling is down because boat sales are down due to the slow economy. We also collect revenue from the total amount of sales tax on boats. However, we only receive 5% while the Comptroller’s Office gets the other 95%. These numbers are down about 14%. Since a majority of our revenue comes from boat registrations, the slow economy doesn’t seem to be impacting us much.

State park revenue for the fiscal year is estimated at $27.6 million. For the period of September through April we have collected 56% of that estimate. Revenue is up nearly 9% over last year as of April 30, 2002. Historically we collect most of our park revenue between March and August.

As of April 30, 2002, with two-thirds of the fiscal year complete, we’ve encumbered/spent 65% of our operating budget. This is on track with expectations and has been tracking consistently throughout the year.

We have already begun developing the FY03 budget, which will include the cost of implementing some of the suggestions from the Business Practices Improvement Plan. We also hope to continue to fund the minor repair program in parks and set aside some money for the increase in the WorldCom contract cost. We also plan to include another game warden academy in the FY03 budget. We have reviewed the appropriation authority and the estimated funds available and the bottom line is that we will be close to the amount we had budgeted in the current year. We will not have any contingency funds available and we expect by the end of FY03 to have depleted the funds in the state parks account. This summer we are also putting together our appropriation request for the next biennium. It will be due in two parts. The first is due June 28 which is just a calculation of what our current biennium spending is expected to be. That’s what they consider our base. The second part includes exceptional items which is anything over and above the base. Once that is done we will begin having budget hearings with the staff at the Legislative Budget Board and the Governor’s Office. We anticipate those beginning in September or October. Then the Legislative Budget Board and the Governor’s Office will make recommendations to the Legislature on our appropriations at for the FY04-05 biennium. We have discussed some of the items that we might consider requesting as exceptional items. During the last legislative session the Legislature passed two pay raises, one for FY02 and another one for FY03. Both were contingent upon the Comptroller being able to certify that funds were available. The Comptroller’s Office did certify the funds were available for FY02, but not FY03. Since we had to reduce our operating budgets internally in order to make up for the pay raise that didn’t come with any extra funds, we have discussed requesting general revenue to cover the pay raise. It also looks like we are going to need more general revenue for parks since we will have spent down those funds in the park account. We’ve also talked about the possibility of asking for more game wardens in the field. Those are just a few items, and we would also like to know what you want to include on the list. In order to discuss the FY03 budget status with the Commission, a budget workshop has been scheduled for June 20, 2002 at 9:00 a.m. in Austin.

4. Revenue Estimating Methodology

Presenter: Ms. Suzy Whittenton

Ms. Whittenton presented information regarding our revenue estimating methodology as recommended in the Business Practices Improvement Plan. Ms. Whittenton shared the methodology that we plan to use in estimating future revenues for the upcoming biennium. Since we are a fee-funded agency, we have to include revenue estimates in our appropriations request that is due in August. This is a methodology we have used before and have shared with the Comptroller’s Office revenue estimators.

We collect historical data for the past five years and analyze that data by Comptroller object code which is by revenue type within each fund. Then we conduct a trend analysis by calculating historical average change in each revenue type and pulling out unusual occurrences and fee changes are taken into consideration. From this analysis, a first cut revenue projection is prepared. From the first cut there is no allocation or allowance for any future unusual occurrences. We don’t subtract off an amount in case we have a drought or anything else that’s unusual. So it’s just a straight trend. The process from there is that this first cut revenue estimate will be shared with the division directors for their input and to determine if there are any anticipated future events that would invalidate the use of the trend analysis. If so, those events would be quantified and revenue estimates would be adjusted. We would then review and share our estimate with the Comptroller’s revenue estimators and discuss our rationale. Final projections will then be presented to division directors again, and then ultimately the executive director would approve it. Then the final revenue estimates are included with our appropriations request, which is sent to the Legislative Budget Board, Governor’s Office and the Comptroller’s Office. Those numbers are used by the oversight agencies in coming up with their recommended future appropriations. Then the Comptroller’s Office publishes a statewide revenue estimate called the Biennial Revenue Estimate (BRE), which usually is released right before the legislative session begins. These are the official revenue projections and they are used to certify the State’s budget. We work closely with the Comptroller’s Office in coming up with our estimate so they’re not too far off from what comes out in the BRE. Last year we were within 1% of their estimates and we hope to come close to that again this next time.

The accuracy of our revenue estimates are important because the Legislaure will grant budget authority based on the Comptroller’s revenue estimates. Our annual operating budgets are driven by a combination of appropriation authority and available cash balances and revenues. So business decisions are largely impacted by how much we have to spend on our programs. And lastly, credibility with oversight agencies and the Legislature can be impacted if we over or underestimate those revenues.

The timeline for this exercise includes beginning the development of the numbers in June and plan to obtain review and approval internally in July. We will share those estimates with our oversight agencies in July and August and then submit our official appropriations request in August. Then the budget hearings will begin with the staff of the LBB, Governor’s Office and Comptroller’s Office. Finally, in January the Comptroller’s Office will publish their BRE right before the session begins.

I have shared the revenue estimate methodology with the Comptroller’s Office and have verbally obtained their approval. In fact, I have worked with Mr. Winfred Kang from the Comptroller’s Office for over ten years and he agrees that keeping it simple is the best methodology, not factoring in too may “what-ifs”. I plan on sharing the methodology with the LBB and the Governor’s Office to get their approval as well.

The only changes that have occurred are asking the division directors for input and getting the executive director to approve it. Also, in the past staff tried to make the numbers more conservative in case we had a bad year. The oversight agencies discourage this because they feel that if you have any unusual occurrences then you would adjust your budgets at that time or you would ask for emergency appropriations. We had been criticized for underestimating revenues in the past.

The SAO will also be included in the oversight meetings and will be aware of our estimates.

(The Finance Committee was recessed and the Conservation Committee was reconvened so that they could break for Executive Session.)

5. Nonprofit Partners Resolution

Presenter: Ms. Susan Harris & Ms. Page Campbell

We have looked at the Sunset legislation and the mandates that impact the Department as well as the Commission. We will also going to look at how the project evolved into a Natural Leader’s project. Finally, we’ll look at the categories that were identified by the project team.

Senate Bill 305, also known as the Sunset Bill, authorizes the Department to select and cooperate with nonprofit partners, but it also requires that the Commission approve each nonprofit organization selected to partner with the Department. The Sunset staff report stated that the Department does have beneficial relationships with private, nonprofit foundations, but that additional controls are needed. So they recognize the significance and the importance of the partnerships, but they just wanted to have a few more controls put in place. As part of the Sunset implementation plan this was selected as a Natural Leader’s project. Senate Bill 305 defines a nonprofit partner as a nonpolitical legal entity that is incorporated under the laws of this State, has been granted a 501© tax exemption and works with the Department to further its goals. The project team established three specific categories into which all current nonprofit partners were grouped – official nonprofit partner, closely related nonprofit partners, and other nonprofit partners. The official nonprofit partner is the Parks and Wildlife Foundation of Texas; and as such it is the single nonprofit organization designated by the Commission to function as the principal support entity for the Department. The second category, closely related nonprofits, is nonprofit by law and their sole purpose is to support Parks and Wildlife, its facilities, and the research or activities with the facilities. These are known as friends groups or support groups. They are administered by the board of directors and they are independent from control of the Commission. The team identified 69 closely related nonprofit partners that have a signed memorandum of agreement on file here at the Department. The third category, the other nonprofit partners, they are also nonprofit by law and their mission statement compliments the mission of Parks and Wildlife. These relationships are on-going and they provide us money, goods and/or services. This level of partnership can vary from paying travel expenses for employees to attend certain conferences all the way to full conservation projects such as building marshes or even acquiring property. The team has identified 101 that meet the other criteria.

The grouping criteria we used were discussed with our legislative team and the Sunset staff. We didn’t want to consider a one-time donation as a partnership because the list would too large. Guidelines have also been established so that the list is updated accordingly and the Commission is notified when additional partners are added to the list. The Commission approved moving the item to the Thursday Commission meeting agenda for public comments and action.

6. Point-of-Sale Update and License Legibility Rules

Presenter: Ms. Suzy Whittenton

Ms. Whittenton briefed the Commission on the implementation of the point-of-sale system, the closeout of the old Transactive system, findings of the PricewaterhouseCoopers’ review, status of planning for the new license year, phase III enhancements that are still outstanding, and finally a discussion on proposed license legibility rules.

On the old Transactive system we essentially completed that closeout. The game wardens assisted in picking up some of the terminals that had not been turned in yet so that we could check them all to see if there were any off-line sales on any of those terminals which was one of the State Auditor’s concerns. There were less than a hundred out there that we collected and we had hired some Transactive employees to help us pull those off-line sales for a total of $236 that had been uncollected. We billed those 15 agents for those off-line sales.

We contracted with PricewaterhouseCoopers to review the controls in the new WorldCom system. The final report was received last week and there were two major findings. One is that gaps were identified in sequence numbers on the licenses. And in looking at those gaps, some of those gaps relate to failed transactions that are recoverable. So there was enough information available where we can recover the transaction/information and get it into the database and bill the agents as necessary. At this point, no transactions have been identified that are not recoverable. Worldcom is working on correcting that problem. The other finding was that some off-line limiters are not functioning as designed. These are checks in the system that prevents you from selling more than $1,000 off-line at any one time. They found that there were some cases where you could do that so we are working with WorldCom to ensure that these issues are addressed quickly. There were a total of 24 recommendations in the report, all of them were minor other than the two above. However, we are following up on all of them.

We are preparing for the new license year and in doing that we have 1,937 agents right now that have made at least one sale. That number is about 12 higher than last time. We actually have over 2,100 that are enrolled, but only 1,900 have made a sale. We are working on system stability issues. There are some operational problems primarily with the hypercom units. A new release is going out to the agents this week that has been tested here. We are working with WorldCom to ensure that the system is stable well before the license year begins and no major changes in sales applications will happen before the new year. We are also going to provide some state-wide training to the agents in July at eight different locations across the state. We are going to have law enforcement staff trained during the summer and we’ll get agent support information on our Website. We are also doing some contingency planning in the unlikely event that something should happen with the system we have something to fall back on. Part of the WorldCom contract requires that they escrow their software with a third-party vendor. We are making sure that the software gets escrowed. Currently the software isn’t in escrow because the system is being built. The escrow agreement requires that every time a new release comes out that they would have to put it into escrow. That has just not been done by WorldCom. We are supposed to have a report tomorrow as to where they are in the process. That issue will be brought up during weekly phone calls Mr. Cook has with the senior management with WorldCom. Once the escrow is set-up it will be with Fort Knox Escrow Services, Incorporated.

Phase III of the project will be going on this summer also. It will include enhancements for ease and efficiency of use, including a more streamlined sales process, use of bar codes to read last year’s license from and would also include some of the other PricewaterhouseCoopers’ recommendations. We have an improved format that’s being designed for the licenses which has the white-tailed deer log on the back and some small graphic images on the tags of the animals. The final software releases are expected later this year, including Internet sales, but that won’t happen until after the license year kicks off. As required in the Sunset Bill, we have to specify legibility standards for the licenses, including paper and print quality and a minimum font size. We will propose standards that specify that, for example, the paper has to be durable, water resistant, waterproof, tear resistant, and printed in an indelible print and that the font size be reasonable and no less than six point, which is what the license is right now, and in a color that contrasts with the background. We would like to publish proposed changes in the Texas Register and bring it to you in August as a recommended rule for adoption.

Information is obtained through the system of how much each agent has sold. Then we sweep those funds from their bank accounts once a week. There is a reconciliation process that goes on to make sure that we’re capturing all the sales. We are going to hire an auditor who will audit the WorldCom system on an on-going basis.

We have been looking at and preparing contingency plans in case the system was to go down. We are looking at what I will just call an emergency backup paper system. We can stock pile a year’s supply of paper licenses, very simplified, with blanks in all the right spots that would have to be filled out, in case something happened. That way we could continue to sell licenses, continue to permit people and to do the various things this system does, by hand. We are currently trying to determine what this contingency plan would cost us. We would have to change some of our rules in order to implement a system like that, and that would take commission action.

The Commission authorized the staff to publish the item regarding legibility in the Texas Register for the required public comment period.

6. TPW Facility Transfer – Port Lavaca

Presenter: Mr. Walt Dabney

Mr. Dabney discussed that potential transfer of the Port Lavaca State Fishing Pier. It’s a ten-acre site that we have had since 1963 after Hurricane Carla blew down the causeway. We converted the site to a 3,200-foot fishing pier, but was struck by lightning and 1200 foot of the end of it burned off. The Commission authorized using transfer money from 2108 to do an engineering assessment as to what we ought to do on this with the notion of possibly transferring it to the City of Port Lavaca if we fixed it up. Port Lavaca had been operating his site as a city fishing pier. The engineering assessment we got back told us it would cost us about $320,000 to tear it down and as much as $6 million to fix it up into a first-rate fishing pier – somewhere between $3 and $6 million. It didn’t seem to be in the best interest of the Department at the time. In talking to the City of Port Lavaca, they are making a request for us to give them the money that we would have used to tear it down, the $320,000, and they will find additional monies to fix the pier back up into a serviceable fishing pier. We think that a good deal and we are recommending to the Commission tomorrow that we do, in fact, affect a transfer of this to the City of Port Lavaca. The Commission placed the item on Thursday’s Commission meeting 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
August 2002

(This item will be an oral presentation.)


Committee Agenda Item No. 2
Presenter: Suzy Whittenton

Finance Committee
FY03 Operating and Capital Budget and Texas Parks and Wildlife Investment Policy, Budget Policy
August 2002

(This is Public Hearing Agenda Item No. 9.)


Committee Agenda Item No. 3
Presenter: Suzy Whittenton

Finance Committee
Point of Sale Update
August 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.


Committee Agenda Item No. 4
Presenter: Suzy Whittenton

Finance Committee
Revenue Estimating Methodology
August 2002

(This is Public Hearing Agenda Item No. 10.)


Committee Agenda Item No. 5
Presenter: Tim Hogsett

Finance Committee
Grants
August 2002

Local Park Fund Outdoor Recreation Grants – (This is Public Hearing Agenda Item No. 4.)
Small Community Grants – (This is Public Hearing Agenda Item No. 5.)
Regional Park Grants – (This is Public Hearing Agenda Item No. 6.)
Recreational Trails Grants – (This is Public Hearing Agenda Item No. 7.)
Target Range Grants – (This is Public Hearing Agenda Item No. 8.)


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