Texas Parks and Wildlife Commission
Finance Committee

May 23, 2007

Commission Hearing Room
Texas Parks & Wildlife Department Headquarters Complex
4200 Smith School Road
Austin, TX 78744

BE IT REMEMBERED, that heretofore on the 23rd day of May, 2007, there came to be heard matters under the regulatory authority of the Texas Parks and Wildlife Commission in the Commission Hearing Room of the Texas Parks and Wildlife Department Headquarters Complex, to wit:

APPEARANCES:

THE TEXAS PARKS AND WILDLIFE COMMISSION:

THE TEXAS PARKS AND WILDLIFE DEPARTMENT:

PROCEEDINGS

COMMISSIONER FITZSIMONS: Good morning. This meeting is called to order. Before proceeding with any business, Mr. Cook, you have a statement to make.

MR. COOK: Thank you, Mr. Chairman. A public notice of this meeting, containing all items on the proposed agenda, has been filed in the Office of the Secretary of State, as required by Chapter 551 Government Code, referred to as the Open Meetings Act. I would like for this fact to be noted in the official record of this meeting.

COMMISSIONER FITZSIMONS: Thank you, Mr. Cook. Chairman Holt, please call the Finance Committee to order.

COMMISSIONER HOLT: Thank you. First order of business is the approval of the previous committee meeting minutes, which have already been distributed. Is there a motion for approval?

COMMISSIONER RAMOS: So moved.

COMMISSIONER HOLT: So moved. Second?

COMMISSIONER BROWN: Second.

COMMISSIONER HOLT: Thank you. You moved so fast. Commissioner Ramos and Commissioner Brown, thank you. All in favor, please say, Aye.

(A chorus of ayes.)

COMMISSIONER HOLT: Any opposed?

(No response.)

COMMISSIONER HOLT: Hearing none, motion carries.

Committee item number 1, Land and Water Plan update, Mr. Cook.

MR. COOK: Thank you, Mr. Chairman. Staff at Texas Parks and Wildlife Department are happy to report to you that we're very focused on implementing the recommendations from the State Auditor's recent state park audit. That is our agency's number one priority and will remain our number one priority through the summer and the early fall for sure. We had a lengthy conversation about this in our Monday morning meeting this week, to the effect that as we start our budget process ‑‑ wherever we end up in the legislative session ‑‑ when we start our budget preparation process on June 1st, resolving the State Auditor's recommendations will be our number one priority as we set our dollars and our FTEs in place. Scott will be bringing you some more details about this effort in his presentation to the Finance Committee.

We're beginning our FY '08 operating budget process, as I mentioned and, hopefully, we will soon have some idea about our appropriation levels, what that will be for our next fiscal year. We will very carefully study those needs, allocate those resources as per legislative intent and as per the directions of the Commission and your guidance. As in prior years, we will conduct a budget work session for the Commission, probably in mid-July. Generally, we shoot for somewhere around the 16th, 17th, 18th of July in order to meet all the deadlines that we have in submitting those documents, which ends up being a package of documents about the size of a telephone book. We will have to meet some deadlines and that information will have to be turned in probably in early August. So we will have our Commission workshop, like I say, in mid-July and certainly, you are welcome to participate in that process every day as we go through the process.

You may recall that we were upgrading our hunting and fishing license system with Verizon. I'd like to give you an update on that. It is an important project. We are installing new license sales equipment with all of our license agents across the state. To this point, we've installed 88 percent of the equipment statewide. We are processing sales transactions through that new system, as opposed to the old variety, the old technology. It is working well. To date, we've processed over 100,000 transactions and are positioning ourselves to be ready and prepared for the peak sales that start with our new license year beginning about August 15th. So we've got a good time period here of testing across the state, working with agents, and getting that equipment in place, and we believe we will be ready.

Thank you, sir.

COMMISSIONER BIVINS: Let me ask you ‑‑ how many locations, when it's fully ramped up, do you anticipate?

MR. COOK: Commissioner Bivins, I believe we're still slightly, right around 2,000. I don't remember if we're just under or just over 2,000 different agent locations across the state. You know we look at that every year. We look at the distribution on the map. Sometimes, we lose some in some critical areas. You know, people just decide to get out of it.

COMMISSIONER BIVINS: Right.

MR. COOK: If that happens, and if there's a big hole there, we try to get in with our local folks, our local game warden, fisheries folks, wildlife folks, to find someone in that area who can supply that service. So we try to keep those holes filled. I believe we've got good coverage. We're not hearing much from folks about the availability, but it's a constant effort. Mary and her shop, and the folks in licensing, like I say, we go through that review every year. I'll be glad to share that. We have a map that shows all of the locations, how many there are, in what towns, and such as that.

COMMISSIONER BIVINS: I'd be interested to see that.

MR. COOK: Yes, I'd be glad to show it to you.

COMMISSIONER HOLT: Thank you, Mr. Cook. Committee item number 2, Financial Overview, Ms. Mary Fields.

MS. FIELDS: Good morning, Commissioners. For the record, I'm Mary Fields, Chief Financial Officer. I'm here to provide the financial overview. The focus of our presentation will be to provide a revenue and budget status for fiscal year 2007 through the end of March. We've basically added one month of activity since I reported to you in the April meeting, so the numbers I'm going to be reporting are going to be pretty similar to what we reviewed last month.

Let's go ahead and start with the state park receipts. When comparing state park gross receipts through March 31st, at $17.12 million, we're at 9.5 percent or $1.5 million over last year's collections at this same time. If you look there at the categories on the chart, you can see that the Facilities category and the Concessions, and basically Activity fees have the largest categories of growth. I want to mention just a couple of key drivers or highlights within those categories that I thought was pretty interesting. The Concession category grew by almost $592,000 and over $320,000 came from the Texas State Railroad. So they are definitely doing well with their concessions and ridership there, and it's a big contributor to that category. In the Facilities category, that category increased by over $595,000, and almost $188,000 of that came from Indian Lodge. You'll recall that we had those rooms recently remodeled and they're all open. So we're making some good headway there.

As far as revenue trends, you know we're at 9.5 percent now. We were a little bit higher toward the beginning of the year. If we continue this trend, I'd expect to see us somewhere between 5 and 10 percent ahead of last year at the end of the year, which will be above our revenue projection. So we're doing real well.

The Boat Revenue as of March 31st is at $8.5 million. This is up 17.1 percent, or $1.25 million compared to last year at this time. Most of this increase, as you can see again on the chart there, is coming from our boat registrations. I think the rain this year has improved the lake levels. Last year, we were impacted by drought conditions as you all recall. Also, I just wanted to mention that registrations are renewed on a two-year cycle. If you look at the trend over the last few years, the odd year is higher normally than the even year, by about 4 to 5 percent as far as the number of registrations. So both of those things, I think are contributing to the increase that we're seeing. Again, with this revenue, you know, looking at it and trying to project, I think, where we might be by the end of the year, I'm projecting probably about a 5 percent increase in total over prior year.

COMMISSIONER HOLT: Have we had price increases on anything, registration, title, anything?

MS. FIELDS: Not between these two years, no, there haven't been.

COMMISSIONER HOLT: Okay.

MS. FIELDS: Again, we continue to transfer the 15 percent of registration and titling revenue to Fund 64. That amounts to $1.1 million based on the revenues that were earned through March.

On the license sales revenue, again, we're also up here at the end of March. At $74 million, we're up $2.3 million in revenues as compared to last year, or 3.3 percent. Again, all categories of revenue here are higher than the previous year, but I will highlight the fishing revenue because that is up the most with an increase of over 6 percent from the prior year. Again, I think those lake levels are helping us out with the fishing. Another thing I'll mention is because '06 was a little bit lower, I did go back and look at '05. Our '07 revenues are tracking very closely to our 2005 revenues. We're within like 1 percent of where we were. That's been pretty constant throughout the year. We closed fiscal year 2005 at $87.2 million and I expect us to be right around in that area by the end of '07.

In reviewing the number of licenses sold, at 2.24 million, we're up 2.9 percent. This again closely correlates with the revenue totals that we just talked about. I'm not going to go into a lot of the details here. You can see on the slide the percentages of increases there in the major categories for hunting, fishing, and combo sales.

When comparing our 2007 revenue collections as of March 31st to the annual revenue estimates, we're continuing to do well. Again, that's no surprise since we've got growth in all our major revenue sources. With 58 percent of the fiscal year elapsed, we've collected 68.3 percent of our Fund 9 Game, Fish, and Water Safety Funds, 78.8 percent of the State Park Funds, and the Local Park Fund is at 74.7 percent, and the Other category is at 90.

Our overall budget has increased by $2.8 million since February 28th. That's taking our budget to $332 million. The budget adjustments that were made during the month of March are summarized on this slide. The most significant adjustments again relate to numerous state and federal grants that we brought into the budget in the amount of $1.7 million.

In reviewing our fiscal year 2007 budget versus expense, we have 51.8 percent of the budget remaining with 58 percent of the year elapsed again. All of the categories are basically on track. We are showing 86.9 percent of capital expenditures available. This line item includes all categories of capital, including construction, vehicle purchases, land acquisitions, those sorts of things. Of course, the largest category there, in that expense line item, is the construction. We continue to work on the available balances in that category with several projects in progress.

That concludes my presentation. I'd be happy to answer any questions.

COMMISSIONER HOLT: Any questions, Commissioners? John?

COMMISSIONER PARKER: Going back to the budget adjustments, grants from federal and state, $1.658 million, what makes up the largest share of that category?

MS. FIELDS: I didn't bring that detail with me, but I did review it and there are numerous grants that come in that we add to the budget. We have our policy of not adding grants to the budget until we have the signed agreement. I'd be happy to pull that detail for you and review it with you.

COMMISSIONER PARKER: Okay.

COMMISSIONER HOLT: Any other questions for Mary?

(No response.)

COMMISSIONER HOLT: All right. It's all good news.

MS. FIELDS: Am I going backwards? I'm going backwards. Well, thank you.

COMMISSIONER HOLT: Thank you. Committee item number 3, Legislative Update, Mr. Cook.

MR. COOK: Well, I wish I had an extensive and very informative report to provide to you, but as you know we're still very, very much in the process. We have a number of bills that we are following as to their status. Of course, the appropriations process is pretty much dominating our attention at this time, but that is still very much in progress. We do not know where we will end up. I think that's probably enough said about that one.

We watched yesterday, as we were going about our business, and I noted that the water bill did pass out of the House yesterday with 101 amendments. So I don't want to say much more about that than that, but at least it's good that it's still moving and still alive. HB 12, of course, is another bill that is of great interest to us and it is still, in some form or fashion, alive, but struggling. If there's any bill in particular you're interested in ‑‑ I note that we still have the Kickapoo bill still alive and we have been watching that one closely. I think other than that, Mr. Chairman, I will withhold any discussion about the legislative process.

COMMISSIONER HOLT: You don't want to ‑‑

MR. COOK: I'm not going to speculate.

COMMISSIONER HOLT: You're not going to want to speculate?

MR. COOK: I hope that those folks have a good day and I'll tell you this ‑‑ certainly, Parks and Wildlife, they have been very courteous to us and ‑‑

COMMISSIONER HOLT: Good.

MR. COOK: ‑‑ assisted us through the process. I appreciate staff, particularly Mr. McCarty and Harold Stone and the work they've done down there. They're keeping us informed, and kept us involved, and answered many, many, many questions. They've been very responsive and I think that's been appreciated.

COMMISSIONER HOLT: When does the actual session end? Is it midnight Tuesday?

MR. COOK: I believe ‑‑

MR. McCARTY: 11:59 Monday night.

COMMISSIONER HOLT: Oh, Monday night?

MR. COOK: Yes, Monday night at midnight, that's supposed to be the day.

COMMISSIONER HOLT: Okay.

MR. COOK: We're all pulling for them.

COMMISSIONER HOLT: Yes. I assume they're probably wanting to get out of there, too.

MR. COOK: I know that they are. It's been a long session.

COMMISSIONER HOLT: Exactly. Any questions or comments on Legislative?

(No response.)

COMMISSIONER HOLT: Okay. Committee item number 3, Implementation of Recommendations by the State Auditor's Audit of State Parks Financial Processes, Mr. Scott Boruff.

MR. BORUFF: Mr. Chairman and Commissioners, for the record, my name is Scott Boruff. I'm the Deputy Executive Director of Operations. I'm planning today to present to you your first briefing on our ongoing efforts to implement the recently released State Auditor's Office report. Just as a bit of background, as we moved towards the legislative session last year, as you are aware, we presented our Legislative Appropriations Request, which included about $85 million in additional state park funding. The Legislature, in considering that request, as we moved toward the session, asked the State Auditor's Office to come take a look at our financial procedures in state parks.

In particular, that audit began in December of last year and it ran through February of this year. There were, during that time, some 16 different auditors who came into the agency and looked primarily at State Parks and their financial procedures, although the audit did go a little bit beyond that in terms of looking at some of the other divisions, infrastructure and AR, in terms of how they related to the State Parks' budgeting process, our financial processes. The objectives that were stated by the auditor were to determine whether the budget projections for the upcoming biennium were reasonable and were supported by the information that we provided and secondarily to look at the deferred maintenance costs, which at that point were estimated at some $400 million in backlog of major repairs that were needed.

The report was formally released on March 19th and contained some 48 specific recommendations, which I'm not going to go over in detail here. The recommendations were broadly categorized into four major categories. The most important was the first one that you see on the screen. This was the one that really closely tracked the internal audit recommendations that had been made by our own internal audit shop prior to the State Auditor's efforts. That was to address significant financial control weaknesses in the state park operations. The second was to improve the accuracy of park visitation recording and to maximize state park revenue. The third big category was to improve the consistency of cost-estimating processes and ensure proper prioritization of the capital improvement repair needs.

Those were the main four categories that these 48 recommendations were broken into. We will be glad to share with you in more detail, offline, if you're interested in the specifics of the recommendations. I will tell you that back in February, prior to the release of the audit, during the middle of the audit, Mr. Cook pulled in the executive team and we began to look at how we were going to address the audit's recommendations. In March, when the recommendations did come out in those four broad categories, we put together work groups that were cross-divisional, that represented all the major divisions, and began to develop plans on how we were going to address those recommendations. Immediately after the release of the report in March, we put together a response to the State Auditor and other leadership downtown that let them know that we took this very seriously and that we were going to address all the recommendations. We began immediately to draft a detailed plan on how to get there.

The next couple of slides that we wanted to show you are where there were a set of recommendations that were targeted specifically to the Commission. We thought you ought to see those. The first one there is the SAO recommended that we, the Commission, but the agency also, notify the Governor's Office and other oversight agencies at least six months before closing or transferring any state parks. The second recommendation for the Commission was to seek input from the oversight committees to maintain a state park system that has statewide merit and serves the agency's goals and missions. The third was to hold public hearings on proposed transfers, closures, or sales of park land.

The next slide is to establish prioritization criteria for repairs and critical improvements. The next was to develop a risk assessment methodology to rank those repair needs, in other words to be able to prioritize them; should integrate, prioritize project cost estimates into the capital budgets of individual parks. The next one is to consider other financial options, such as using additional revenue generated from capital improvements, to finance the cost of the repairs.

Parks and Wildlife Commission should inventory employees' business and fiscal management skills to identify areas that need improvement. The Commission should provide adequate and professional training to management staff to increase awareness of business concepts such as internal controls, and equip the staff with adequate business management skills and knowledge.

I will say, before I conclude the process, that many of these recommendations we believe we have a pretty good handle on and are moving forward. Some of the problems we believe that were reflected in the SAO report had to do with our documentation of our processes. That's not to say that we don't need some improvement, because we acknowledge that we do, but we do believe that those recommendations that were targeted at the Commission, many of those things are going on at a pretty significant level already. We do need to improve the documentation and we do intend to try to improve those areas that need improvement.

Mr. Cook has asked me to lead this effort. We have also employed an outside consultant from outside with many, many years of state business expertise, that reports directly to Mr. Cook, and will be helping us both internally look at the processes and make sure that what we're doing is on track and moving forward appropriately; and, number two, will help us communicate with the leadership downtown about the seriousness and sincerity of our efforts to try to get this thing done as quickly as possible. With that, I'd be glad to take questions.

COMMISSIONER HOLT: Any questions for Scott?

(No response.)

COMMISSIONER HOLT: I want to thank Mr. Cook, and Scott, and others, because they got on this right away. It certainly was a big part of our credibility when we were down talking to various people in the Senate and the House, I think, the attitude that we took towards the audit. I think we need to give Bob and Scott credit. They immediately jumped on this thing, started Monday morning meetings, and importantly ‑‑ and also Gene ‑‑ got answers back and then started taking the actions. I think that has helped our credibility with the Legislature. I think it's going to pay off for us, hopefully in the next few days, but most importantly is that I just appreciate you all taking the attitude you did towards the audit and moving forward.

MR. COOK: We appreciate your support. You know, the bottom line here is going to be the resolution of these issues.

COMMISSIONER HOLT: Yes.

MR. COOK: That is our goal.

COMMISSIONER HOLT: Good.

MR. COOK: We're single-minded in it. You know, we are, frankly, anxiously awaiting the outcome of the appropriations process. As you will recall, in our LAR that we submitted back in August of last year, we had put a significant number of dollars and resources in our LAR request to address the primary of these very issues. So we are at a point in time now where we've identified the additional FTEs that we need, where we need them, where we can move them from the State Parks Division into Mary's shop, we are going to do that, where we have qualified people who are capable and able to do that job. Otherwise, we are going to go outside and hire new people to fill those needs. That shift of responsibilities, I think, is consistent with the auditor's report and we will get there.

You will notice, I think, when we go up today I will point out to you a work chart on the wall of our conference room, that any and every time every single one of us get together, that work chart with dates and deadlines and people assigned to those jobs, those specific tasks, is on the wall and it will be updated regularly and watched on a daily basis. We will report to you at each Commission meeting. We will have a brief report on our audit status at each Commission meeting. So we appreciate your support. This has been a tough one. It's been something that we recognize we need to do and we have worked hard to get here, and keep our parks open and in good shape, and that's going to continue to be our goal.

COMMISSIONER FITZSIMONS: Well, Peter, I want to thank you for your help on that. I think everybody handled it just right. Peter appeared before the Senate. I appeared before the House on this matter. You know, we're tackling it. There's a commitment certainly in the staff to deal with it. The only question is whether we'll have the resources to do the job. It looks like we will. So thank you, Scott, for ramrodding this.

COMMISSIONER HOLT: Any questions for Scott on the audit?

(No response.)

COMMISSIONER HOLT: Thanks, Scott. Any other business to be brought before this committee, Mr. Cook?

MR. COOK: No, sir.

COMMISSIONER HOLT: Okay. Then I will pass the gavel and we will run fast to whatever is next.

COMMISSIONER FITZSIMONS: You've always got to make a run through Regulations. I appreciate you.

COMMISSIONER HOLT: Is Regulations next?

COMMISSIONER FITZSIMONS: No, Conservation.

COMMISSIONER HOLT: Oh, Conservation.

COMMISSIONER FITZSIMONS: We always have to save plenty of time for Regs. You know how they are.

COMMISSIONER HOLT: Yes, Dan likes the floor.

COMMISSIONER FITZSIMONS: Okay. I think we've got a new Conservation chairman. Commissioner Montgomery just didn't have time for it today.

COMMISSIONER HOLT: Is that what happens? If you don't show up, you're out?

COMMISSIONER FITZSIMONS: Yes.

MR. COOK: And the bonus pay goes to ‑‑

COMMISSIONER FITZSIMONS: Yes, the bonus pay, make a note of that; he won't be getting that anymore.

COMMISSIONER BIVINS: It transfers to me. Right?

COMMISSIONER FITZSIMONS: That's right. Our new Conservation Chair, Mark Bivins, couldn't do it any earlier because he wasn't confirmed.

COMMISSIONER HOLT: That's right. Congratulations.

COMMISSIONER FITZSIMONS: Congratulations, well done.

COMMISSIONER BIVINS: Thank you.

COMMISSIONER FITZSIMONS: You have the gavel. I don't know. Is he ready for the gavel? What do you all think?

COMMISSIONER HOLT: I think he's ready. He can answer those questions.

COMMISSIONER FITZSIMONS: All right.

(Whereupon, at 9:35 a.m., the Finance Committee was adjourned.)

CERTIFICATE

MEETING OF: Texas Parks and Wildlife Commission, Finance Committee

LOCATION: Austin, Texas

DATE: May 23, 2007

I do hereby certify that the foregoing pages, numbers 1 through 22, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Penny Bynum before the Texas Parks and Wildlife Commission.

6/05/07
(Transcriber) (Date)
On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731


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