Texas Parks and Wildlife Commission
Finance Committee Meeting

March 31, 2010

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

BE IT REMEMBERED, that heretofore on the 31st day of March 2010, 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:

P R O C E E D I N G S

COMMISSIONER FALCON: Thank you, sir. This Committee is now called into order. The first order of business is the approval of the previous committee minutes which have already been distributed. Is there a motion for approval?

COMMISSIONER MARTIN: So moved.

COMMISSIONER FALCON: Martin.

COMMISSIONER MORIAN: Second.

COMMISSIONER FALCON: Second. All those in favor?

(A chorus of ayes.)

COMMISSIONER FALCON: The first item is the update on Texas Parks and Wildlife Department progress in implementing the Texas Parks and Wildlife Department Land and Water Resource Conservation and Recreation Plan. Mr. Smith.

MR. SMITH: Mr. Chairman, now there are no action items from the plan for us to discuss today or to present, and probably in the interest of time, I am just going to do one thing. I think as you recall, coming out of the Sunset legislation, we were required at every Commission meeting to provide a report on our Internal Affairs investigations in the agency, And so I am going to go ahead and pass out that report to all of you. If you have any questions about it, please don't hesitate to contact either me or Major Graham Jones. And with that, that will conclude my presentation. Thank you.

COMMISSIONER FALCON: Okay. The second item on the committee meeting is the financial overview. And Mr. Mike Jensen, would you please make your presentation, please?

MR. JENSEN: Good afternoon, Commissioners. My name is Mike Jensen. I am the Division Director for the Administrative Resources Division. Before I get started, I would briefly like to acknowledge and thank two of my staff members who don't get a lot of face time with you.

Julie Horsley is sitting back here. She is the Director for Planning and Analysis. And she is prepared to address you all on the Statewide Strategic Plan as part of this session.

And Lance Goodrum, he is the Budget Director. These are two of the directors that report to me, and I really appreciate what they do. And they do a lot of good work for the Commission.

I am prepared to give you a quick summary of the revenue, and the budget status for the Department. What we are going to do is we will have a slide on State Park revenue. And we will discuss that briefly. Then we will have a slide on Boat revenue. And then we will talk about the License revenue.

And we will look at where we stand with the biennial revenue estimate, the BRE. And we have two slides that go over the operating budget as of February 28th.

State Parks is pretty much almost at a breakeven point compared to this time a year ago. They had a strong first quarter. Unfortunately, we had a poorer second quarter, primarily because of the inclement weather. I think that most of you are aware that it snowed all over the place. It was cold. It was really poor performance in January and February.

If you look at the first quarter, we were up about $819,000. But in the second quarter because of the weather, we dropped about $885,000 down. So we are down about $66,000. But this does not represent the month of March.

COMMISSIONER HOLT: So you don't have spring break, and yes.

MR. JENSEN: No. This does not have spring break in it. I was out fishing during spring break at Colorado Bend with a group of people, and the park was full. And what I have heard from Walt, all March along, the parks were full. So March should be a very strong month. And if we mirror the performance of last summer, last summer was a very strong summer for revenue, park revenue. With the rain that we have, with the lakes filling back up. Hopefully, we will perform very well this summer with state park revenue, and we will be strongly in the black.

The only item that I am hesitant to mention, but I will mention is we do have a TxParks project that is going to implement hopefully on May 12th. And hopefully, that will streamline things and make things easier in the long run for our visitors and for our state park staff, as well as for other staff who keep track of the revenue.

It is a great system, but it is a very complex system. Scott Boruff has done a great job at leading us and getting us to a May 12, go-live date. And so far what I hear and what I have seen on that team is that is very doable. And I am looking forward to it going live. I think that is going to be some improvements across the board, and it is going to help.

MR. SMITH: Mike, maybe just for our new Commissioners. TxParks is our new automated business system, our revenue and registration system that are being installed at every one of our parks. It processes all of our transactions, all of our sales, all of our reservations. All of our appropriate fiscal controls are built in.

So this has been a huge process that the agency has undertaken in partnership between AR and State Parks. And again, the goal is for this to go live in May. And we need it to function and function well. We are excited about the efficiencies we think it will bring.

MR. JENSEN: This slide represents Fund 64. The outlook is good. I think it is going to be a strong spring, a strong summer. At the next meeting, hopefully we will have the details to prove that to you.

Boat revenue is up, almost 8 percent or about $456,000. Most of this increase in the revenue is tied to the fee increase that took place on September 1 for registrations. Frances Stiles, who oversees the Boat Revenue Program, has compared 2008-2009 and this year. And we are in the positive when it comes to registrations. We are slightly improving with titling. But we are still pretty far behind on sales tax, with the economy being the way it has been; the drought, people have not been selling boats. And what we have discovered recently, this is the peak kickoff time for boat registrations. They are very busy in Building D and across the state with registrations.

A lot of people who were transferring boats in the past year or two, with the drought were holding onto titles until they could actually put the boats in the water. So they are seeing an upswing in the number of problematic titling-type of issues.

Texas has a very complicated titling statute. So people try to ‑‑ I guess that is an avoidance strategy. They don't want to have to deal with that until they actually know they can put the boat in the water.

But the outlook is good. The revenue is up; the registrations are up. And hopefully, if the economy can pick up, then people can start transferring and selling boats like they have done in the past.

License sales revenue, I have changed the graph. In the past, I have usually just shown a comparison from the current year to the prior year, but it think it is important for you to see fiscal year 2008. Because that was the base year that was used for the fee increase. All of the analysis was done against 2008. And 2008 was a fairly strong year for license revenue. So when you look at this slide, you can see, because of the fee increase that went into place in September, the revenues are actually trending and tracking upward. And when we compare to 2008, we are up. 2008 was $71.26 million. The current year at the end of February is $71.8 almost $71.9 million. I think that is a better comparison than against 2009.

2009 was slow, because we started that year with a hurricane. And that impacted license sales, fishing license sales. So we are up compared by $2.81 million in comparing to '09. But when we compare to '08, we are only up by $600,000.

The only caveat I would like to throw in here; I mentioned it at the last meeting. These figures incorporate more than just Fund 9 revenue. Most of these licenses are Fund 9. But the Lifetime License revenue is not Fund 9. So if you pull the Lifetime Licenses out of here, the comparison against '09, we are still up by about $1.65 million. But if you pull it out and compare it to '08, we are down compared to '08, almost $639,000 behind '08. And most of that is going to be tied to ‑‑ you will probably see it in the next three slides, fishing license sales. The trends have changed over what they have been historically.

This is a new slide that hopefully I can explain without confusing anybody. This slide is showing you a variance comparison from 2010, compared to '09 and '08. Just on revenues. So what I will do is, I will walk you down here, and I will relate to you what that percentage means in terms of revenue. And when we look at 2008, that other, that is primarily Lifetime Licenses. Because the spike that we had at the end of '09 and at the beginning of 2010, that is significantly higher. That is 14.91 percent. But that percentage of other, equates to $1.24 million for '08.

Resident hunting licenses in '08, 2.25 percent equates to ‑‑ and we are above '08 by $374,000. Non-resident hunting, we knew that was going to be down. That was in comparison to 2010, in '08. We are about 11.6, 11.7 percent down. And that amount is in the hole $214,000.

Resident fishing, this is the line item that is significant to keep track of. Compared to '08, we are down 12.27 percent. In terms of funding, that is $1.68 million behind '08. Non-resident fishing, this percentage is negative 3.3 percent. But the revenue is only negative $64,000.

The combination licenses are up 3.46 percent. And that equates to ‑‑ we are doing better this year than '08 to the tune of about one point ‑‑ almost $1.02 million.

So I guess one of the questions is, about the fishing licenses, why are those performing poorly? I think the primary reason is going to be economy. The drought is a contributing factor. The spike in Lifetime License sales probably is not because the number that is involved. You will see in two slides from now, it is about 1,100 to 1,200 Lifetime Licenses that are probably displacing combination licenses. But in terms of the count, fishing licenses, 1,000 compared to about 75,000. There is a big swing there.

So it is a small contributing factor. But the largest factors are probably just the economy and the drought. These figures are only through February. So hopefully, they are going to improve as more and more people go out fishing this spring. And like I said, at Colorado Bend, the banks were lined. Everybody was fishing. It was a State Park so some people didn't have licenses. But the people who went with me did. So we contributed.

MR. SMITH: Good work, Mike.

MR. JENSEN: When we compared to 2009, this looks more favorable. But I think the better comparison is '08. When we are looking at the other, we are up 16.02 percent. That equates to $1.17 million.

Resident hunting, we are up 3.9 percent. That is, we are $652,000 above '09. Non-resident hunting, 2.91 percent. That equates to $46,000 above '09. Resident fishing, 2.36 percent down. That equates to $290,000 behind 2009. And non-resident fishing, 3.79 percent behind. That means we are down $73,000 in revenue. And, due to the huge volume of Lifetime ‑‑ well, this is Combo. Sorry. I am getting confused. The 4.24 percent of Combination, we are up. That equates to about $1.24 million.

So overall, the outlook is good. It looks like the fishing licenses are picking up. And we get a weekly report from Tom Newton. And each week, we are looking at those licenses. And we are making good gains. But we will probably know better in about a month or two to see how the spring season is picking up before we kick into the summer.

This next slide speaks of the count of licenses sold. You can see that the revenue trend was moving up. But there is a downward slope for the number of licenses sold. That is typically the result of when you increase a fee. That is a natural reaction to that reality. So when we look at '10, we have sold 2.02 million licenses compared to '09, 2.05. And in fiscal year 2008, that would be 2.1 million licenses.

This slide is doing a similar comparison that we did with the revenue slide except we are looking at the count. And this is where it becomes obvious that it is ‑‑ the fishing licenses are the main concern on Fund 9 revenue. And it also helps us see that the Lifetime Licenses, while they may be contributing to that, what they are really robbing from, it is probably the combination license. Those are people who probably would have bought a Combo license, but now they don't have that need, because they have the Lifetime License.

Most of the Lifetime License sales were for the Combination, rather than just for hunting or just for fishing. So if we look at 2008, that other category, 3.32 percent, that represents 1,140 licenses. So that is a small portion of Lifetime Licenses in the context of ‑‑ and when you get down to the resident fishing, that negative 15.23. That is 75,889 licenses behind what we were in 2008.

I will go back up to resident hunting; that .68 percent. That represents almost 4,700 resident hunting licenses that we are ahead. Non-resident hunting, that percentage looks pretty bad, 16.68 in the hole. The number of non-resident hunting licenses that we were buying to actual count is 6,225.

I have already given you the fishing number. The non-resident fishing that negative 7.3 percent represents 3,600 non-resident fishing licenses that we are behind, compared to '08. Combination licenses, were down by about 1 percent. That represents about 6,163 licenses behind 2008.

So if we go down and make that same comparison to 2009, that other, 2.77 percent that represents about 1,066 licenses ahead, that we are ahead over 2009. The 1.21 percent, the resident hunting represents 8,300 licenses ahead. The non-resident hunting, that negative 3 percent represents 980 licenses behind 2009.

Resident fishing, that negative, almost negative 7 percent represents 31,594 fishing licenses that we are behind the 2009 level. The negative 7.8 percent represents 3,905 licenses that we are behind. And the last one, combination .62 negative, we are about 3,608 combination licenses behind 2009.

COMMISSIONER HOLT: [inaudible] this trend.

MR. JENSEN: This next slide gives a synopsis, a graphic of where we are comparing, how we are performing for the biennial revenue estimate. At the last meeting, we talked briefly about what that means. The Comptroller comes out in January before each legislative session and her staff presents a BRE, a biennial revenue estimate, against which we are measured.

And typically, they don't officially adjust or change that, although some agencies can get minor exceptions. They don't change that publication, those figures. So that is what we are measured against by the LBB and by other oversight entities.

The revenue estimate that we were given, the first line, Game Fish and Water Safety represents Fund 9. The second one, State Park Fund represents Fund 64. The third line, Local Park Fund represents Fund 467. The other category is made up of a number of different accounts, including some Artificial Reef donation money. And it also includes the Lifetime License Endowment Fund.

If we look at the actual revenues that were collected, and the percentage that we are at, in Fund 9, the Game Fish and Water Safety, we are above; this represents 50 percent of the year elapsed. We are above 50 percent, due to the fee increase that we had for licenses that was placed into effect September 1. And this also represents a $3.9 million influx of revenue from an oil and gas lease bonus from a WMA, Chaparral. That is in that figure as well.

One of the reasons that the growth is not going to be as fast as we would like, is the BRE estimate from the Comptroller's office has a very high estimate for oil and gas royalties and for interest. And we also, I have showed you the slide before, for the boat and motor sales and use tax. That is not growing as quickly as we would like because people just aren't selling the boats. But we are okay for Fund 9. We are at 57 percent received; 50 percent of the year has elapsed.

The biggest challenge on this graph is probably going to be the second line; Fund 64. We knew that was going to be a challenge coming into this year, because of the BRE estimate, where they had very high estimates again, on oil and gas royalties, and on the interest. We did have $1.1 million collected from the Trinity River Authority for the Cedar Hills State Park. That is reflected in these figures.

And for right now, the second quarter we had for state park revenues is probably keeping that from increasing too. But I expect that that is going to change in March and in the summer months, the peak months for state parks fee revenue. That makes up part of that second line as well.

The third line, Local Park Fund, that is above average right now, due to about $2.8 million in federal funds that has been collected year-to-date through February 28th. And that very last line, we are doing great. It represents primarily a donation to the Artificial Reef Fund. And it also includes about $3.2 million in Lifetime License funds.

The next two slides are going to give you a real high level summary of the operating budget. Each month, we try to get to you as soon as we can a copy of the monthly financial report. I think the monthly financial report effective through February 28, probably was sent out March 9. I know Commissioner Duggins received it, and I hope the rest of you did. And this kind of gives you a snapshot of where we have moved from December through February 28.

We had a number of budget adjustments that took place. Most of them were small. We had an influx of federal funds. When you see the line up there, that is grants. Most of that is representative of federal funding that came into the agency, that $3.5 million.

And Rich mentioned earlier some UBs. UBs happen throughout the year. Federal funds have also UB authority. So we have 823 that was UB'd in. And we had some donations. On the UB amounts, we had some federal grants come in that were UB'd; $645,000. We had a small piece of old UB construction of about $145,000.

The only comment that I would like to note on this slide is, this does not yet reflect the general obligation bond issuance of $38 million because that was just barely approved. Rich mentioned that to you in his presentation on UBs and construction.

So next time we convene and go over the budget, you are going to see an adjustment to increase the budget by an additional $38 million to reflect the GO bonds. I think TPFA this week has issued the commercial paper, and that funding is now available for us to begin planning.

The very last slide I have for you breaks down the budget by object of expense or different types of budget categories on a very high level. And as I mentioned before, the two largest categories for the Department are basically are personnel costs, are salary and other, that includes fringe. Our adjusted budget has gone to $151.4 million. And the second largest item which includes the UBs that Rich talked about earlier is the capital expenditures. That includes construction as well as a number of other capital items, $133.2 million. This represents 50 percent of the year complete, with 50 percent to go. So the percent remaining; we are healthy. We still have 64.3 percent of our budget remaining.

I think we are in good shape. But we are also anticipating future instructions for the Legislative Appropriations Request that is probably going to affect us more in the future than with our current year and next fiscal year. But there is no telling.

When we get the instructions, we will share them with the Executive Office, and they will share them with you. So that we can give you an analysis of what we think the impact is going to be at that time. I just don't know when we are going to get those instructions.

That is the presentation I have for you on the budget and the revenue side. I would be happy to answer any questions, if you have any. Or defer them to Julie and Lance because they are pretty sharp.

COMMISSIONER FALCON: Any questions or discussion?

(No response.)

COMMISSIONER FALCON: Thank you, Mr. Jensen.

COMMISSIONER HOLT: Spring and summer.

COMMISSIONER FALCON: Committee Item 3 is the natural agenda update. Ms. Julie Horsley.

MS. HORSLEY: Good afternoon, my name is Julie Horsley. I am in the Planning and Analysis Section in the Administrative Resources Division and I will be discussing updates to our strategic plan which is also known as the Natural Agenda.

Just as a bit of explanation, the Natural Agenda is different from the Land and Water Plan that was recently revised. And it is more of a legislative strategic plan that establishes our budget structure and identifies anticipated funding needs. We do make an effort to link the two plans as closely as possible, and I will discuss that a little bit more as we go through the slides.

Just to start off with a little bit of background, the requirement for strategic planning was established by the Legislature in 1991. Provisions of the Government Code require all state agencies to engage in a strategic planning process, and to prepare and submit a five-year plan every two years.

The statute, as well as more specific instructions that are issued by the LBB and Governor's Office, lay out the basic elements that have to be included in all agency strategic plans. These include things like a mission statement and philosophy, an internal external assessment, as well as goals, objectives, strategies, and performance measures.

The goals, objectives and strategies set forth in the strategic plan form the budget structure for each agency, and serve as the framework for requesting funding from the Legislature through our Legislative Appropriations Request. There are also other sections of the strategic plan, the actual text, that are used to kind of serve as a preview of potential exceptional items that will be included in the Legislative Appropriations Request as well.

In terms of due dates and processes, these are pretty much dictated by the LBB and the Governor's Office. Any proposed structure changes have to be submitted to the LBB and the Governor's Office by April 16. Once submitted, there is usually a series of meetings where we review and negotiate the changes. And final approval of those structure changes rests with those offices. And the final strategic plan document, which includes the approved structure, as well as the other elements, is due July 2. Our process here relies very heavily on input that we receive from the various divisions.

We began asking for division input into possible measure and structure changes back in January. And I will be reviewing the submissions that were submitted in the next couple of slides. Divisions are also providing feedback regarding updates and changes to other sections of the Natural Agenda.

So regarding our proposed structure changes overall, we are asking for revisions to a total of seven strategies. The most significant set of changes affects our existing fisheries and management ‑‑ fisheries management and hatchery operations strategies in both Inland and Coastal Fisheries Divisions.

Right now, each division has two separate strategies. One addresses management and the other is hatchery operations and the proposal is to consolidate those two so that each division just has one strategy. The main motivation behind this consolidation is to allow us to address changing funding needs in these areas more easily and more efficiently and without concern about running into transferability limitations.

We are also requesting some relatively minor revisions to strategy wording for Wildlife, Communications and Law Enforcement strategies. Those are mainly for clarification and cleanup purposes.

In terms of our performance measures, we are asking for a deletion of a total of six measures. Two of these are existing state park minor repair measures that will actually be replaced with what we consider to be more meaningful indicators.

The other four are measures of our land acquisition function. These measures are tied to some very specific information that was included in the Land and Water Plan. With the recent revisions to that plan, that information no longer exists, which is why we feel justified that it is appropriate to request deletion of these.

We are also requesting addition of four new State Parks measures. Three of these relate to state parks minor repair program, and are an effort to implement some of the recommendations that were in the State Park System Study which was required by the 80th Legislature.

Then the other measure addition would capture information on the number of persons entering state parks free of charge. This would complement one of the existing measures that we have, which is number of paid park visits.

And then finally, we are requesting revisions to a total of approximately 50 existing measures. These are for the most part, very non-substantive in nature; minor changes to the definitions. There is just a couple that I would like to point out to you just because they are a little bit more significant.

One is, percent of private land acreage in Texas managed to enhance wildlife. We are proposing changing the way we measure that, so that we are using the total land acreage as opposed to private land acreage.

And the other is the number of state parks in operation. We would be proposing a new methodology so that the measure would be based on a count of state park units rather than based on deed information. And that count of state park units would be something that we would bring to the Commission for approval.

In addition to the structure and measure changes, we are also currently working on updating the actual text of the Natural Agenda, including sections outlining key events, legislative initiatives, and strategic priorities. It will be in this section, the strategic priority section, that we link the Natural Agenda and the Land and Water Plan.

Similar to how we laid this out last time, the section is going to be arranged according to major Land and Water Plan goal, and then underneath those, we will lay out the issues and challenges we are facing, and the key accomplishments in achieving that goal.

We will plan to provide you with more details on these sections at the next Commission meeting. And hopefully, by that point, we will have a draft ready for circulation and review. Once comments from the review have been incorporated, the final plan must then be approved and signed by the Executive Director and the Chairman. And as I mentioned earlier, the final plan will then be submitted by the July 2 deadline.

That concludes my presentation. I would be happy to answer any questions you might have.

COMMISSIONER HOLT: The fun stuff.

MS. HORSLEY: I am glad you think so.

COMMISSIONER HOLT: And you have got to blend it, too.

(Simultaneous discussion.)

COMMISSIONER FALCON: Committee Item 4. Julie, I think you also have this.

MS. HORSLEY: Yes. For the record, my name is Julie Horsley. This item consists of a number of different fee items that affect multiple divisions. In the interest of time, rather than having each individual division come up to the table, I will be presenting all of them for your consideration.

COMMISSIONER HOLT: Yes, please. I was looking at a couple of them. One of them is for $5 or something.

MS. HORSLEY: In the event that you do have specific questions ‑‑ I am sorry.

COMMISSIONER HOLT: No, we have to do it. I mean, go ahead.

MS. HORSLEY: In the event that you do have any specific questions on any of the items, I will be deferring to staff that are available in the audience. The first item is a cleanup affecting the grass carp permit fee.

Currently all fee amounts for licenses and permits are located in Chapter 53 of our rules. We recently discovered an outdated fee reference for the grass carp permit in Chapter 57, and are proposing deletion of that obsolete reference. In addition, since the time we prepared this agenda item, we noticed a couple of other instances of outdated fee items listed in other sections and would like to request authority to correct these items as part of this proposal as well.

The second item deals with fees for Department-sponsored events. From time to time the Department sponsors special activities or events and charges a fee to either partially defray or recover the costs of hosting that event. The proposed amendment would clearly authorize, or more clearly authorize imposition of such fees by providing generic authority to recover costs for these types of events.

The third item relates to fees charged for bat viewing at the Old Tunnel Wildlife Management Area. Regulations currently provide a variety of fee ranges for visitors wanting to access the lower viewing areas. And those fee ranges are based on age or group type.

To simplify fee collection and bookkeeping, the proposed amendment would implement a flat $5 fee, regardless of age or group type. And as I mentioned, the fee is for access to the lower viewing area only. Access to the upper viewing area would still be free of charge.

(Simultaneous discussion.)

MS. HORSLEY: And then the final item relates to deer breeder permit fees. Senate Bill 1586, which was passed last session requires the Parks and Wildlife Department to work with the Texas Animal Health Commission to develop a shared database of deer breeder information. The bill also specified that the two agencies should provide incentives, including reduced fees to deer breeders whose cooperation results in reduced costs or income sufficiencies.

This proposal would reduce the permit renewal fee for deer breeders who file at least 85 percent of their required information electronically. The reduced fee would be $200 as compared to $400.

We expect that this will encourage more deer breeders to use the electronic reporting system, and result in greater efficiencies and lower costs to administer the program. The 85 percent criteria was selected to account for the fact that there may be factors beyond the control of deer breeders that might require them to submit information via hard copy or over the telephone.

MR. SMITH: So for instance, our system may go down, and they shouldn't be penalized for that, when they have got to fax it in.

COMMISSIONER HOLT: Right. Yes. Okay. I was just trying to figure out how you came up with 85 percent.

MS. HORSLEY: Thank you for your time. That concludes this presentation.

COMMISSIONER HOLT: Thank you. Thank you for doing the work. You know, I was kind of kidding you. But yes, especially the work that you do working with the Legislature and the LBB, and all of that. Obviously, it sets the tone for everything we do starting with the next Legislature. So thank you.

MS. HORSLEY: Thank you.

COMMISSIONER FALCON: Any discussion?

COMMISSIONER DUGGINS: I think the reduction in the fee is too significant for the ‑‑ because we're still going to have costs. I am serious. And I ‑‑ didn't you and I discuss this?

COMMISSIONER HOLT: Well, we had better have a discussion about it. Yes, if you think it is too much. I assume we can get into it.

(Simultaneous discussion.)

MR. LOCKWOOD: For the record, my name is Mitch Lockwood, Whitetail Deer Program leader, and Interim Big Game Program director. I would like to tell you, Commissioner that we have some wonderful formula and a lot of data to support that figure of $200. When in reality, I really can't defend $200 over $175 over $225.

But I will say that staff and our wildlife permits office actually document the time they spend on each activity for each deer breeder quite well. And they have a pretty good idea of how much of their time goes toward actual data entry versus other issues they deal with in this program. And what we are hoping to accomplish among other things, but mainly with this proposal, is to eliminate as much data entry as possible, which consumes quite a bit of time. And based on the notes that they keep for each record, it is a pretty close estimate, I believe that approximately on average, approximately 50 percent of the time they spend working through deer breeder records and renewing deer breeder permits is with data entry. So we are hoping that if we can reduce that amount of work that they do for each deer breeder, that could justify a 50 percent reduction in costs.

COMMISSIONER DUGGINS: Well, my observation is that first of all, was the fee of $400 appropriate or too low? And I am not saying either way but you could argue that the amount of time that you spend on it, that $400 is probably lower than the amount of time staff spends with it.

MR. LOCKWOOD: Actually ‑‑

COMMISSIONER DUGGINS: Number two, you are talking about a 50 percent reduction in the fee, when they still get ‑‑ they get that reduction by submitting 85 percent instead of 100 percent of it. So the math there doesn't work.

MR. LOCKWOOD: Okay. I would like to address both of those. And I might forget one of them as I go. So help me stay on track, if you would. But the 85 percent ‑‑ in theory, what we are shooting for here, is 100 percent data entry by deer breeders. And what our data is showing us, from the few deer breeders that are currently using the online system now, there are several breeders that are registered ‑‑ in fact, 391. But 15 percent of those people have only logged in one time, ever. So they are not using it. Another 10 percent have only logged in twice. So they are not really using it. But what we have observed is, people are either using it or they are not. If they are using it at all, they are using it for everything.

But there are times when it is actually the Department's fault, for when we have to make edits to records which when we make ‑‑ the way we have this old system designed, and I will just say real quickly that we are evolving into a new system and going to tie this into our TWIMS online system, but that is a couple of years out. So we are operating with a system being held together with a bunch of Band-aids right now. And as the ‑‑ I am getting in a bad habit of this today, losing my train of thought. I really have forgotten now. You need to refresh my memory with a question.

MR. WOLF: [inaudible]

MR. LOCKWOOD: That's correct. Thank you. They are using it 100 percent of the time. And so what we are finding is, if somebody is going to use this system for 50 percent ‑‑ if they do 50 percent of their work in it, they are doing 100 percent of their work in it. But where I was going a minute ago is that there are, at no fault to the breeder, but actually at the fault to the Department, at times where we have to make edits to their records. And when we run this query to see who actually did the work, it is going to show that Parks and Wildlife did the work and penalized the breeder. And it is our fault. And I will just give you one example.

There was a time a few years ago where we made a mistake and we issued duplicate unique ID numbers to a bunch of deer to a couple of cooperators. So of course, they weren't unique at that point. And by the time we found our error, it was too late. And these deer are out there. They have changed hands. Other people have them. And so a new breeder could receive these deer today. And we identify where there is an error on our part. Again, it is no fault of the breeder currently in possession of those deer. So we feel very comfortable that this 85 percent figure will more than cover those situations. Could we have said 90 percent? Maybe.

That is kind of like what I said about the fee. Whether it is $175, $200 or $225, the 85 percent could probably be negotiated as well. But I feel comfortable that we won't penalize any breeders with that expectation, knowing that if they're really doing 85 percent, they are going to do 100 percent based on what we have observed so far.

COMMISSIONER DUGGINS: And the $400 you think is, helps to fully recover our costs on the ‑‑

MR. LOCKWOOD: Thank you for reminding me of that. Currently, we do have good data today, whereas we really didn't have very good data when we changed the fee to $400. Law Enforcement has changed the way they code. We code specifically to that permit as well. And we are certainly recovering our costs today. In fact, as we move forward with this new TWIMS system over the next two years, there is some programming costs associated with that. And this $400 fee ‑‑ actually, based on the way all time is coded today, with Law Enforcement and Wildlife, this fee will cover the costs needed for programming this new system as well.

COMMISSIONER FRIEDKIN: That partially addressed my question. But I am ‑‑ maybe you said it, Mitch, and I didn't hear it. But are we currently collecting more information, more data about these permittees electronically than we would if it is non-electronic? You know, if it is ‑‑

MR. LOCKWOOD: The information we collect from them whether it is in hard copy or electronic is the same information.

COMMISSIONER FRIEDKIN: So the hope is, through the new system, we would be able to collect more information?

MR. LOCKWOOD: No, sir. I don't think I would say that. It is the same information. But it would save us a tremendous amount of time, to where we can finally get caught up in the deer breeder program, and begin taking a lot of our efforts, our fixed costs that we have in the deer breeder program now, and apply it to some other permitting programs ‑‑

COMMISSIONER FRIEDKIN: Let me ‑‑ yes. I probably didn't say that right. So through the new system that we are developing, do you see an opportunity to collect more data and more information than we are currently collecting from deer breeders?

MR. LOCKWOOD: We certainly could. We could build into the business ‑‑

COMMISSIONER FRIEDKIN: We have more flexibility to do that?

MR. LOCKWOOD: If we built those into our business requirements which we are working on right now, we certainly could. I can't think of any additional information that we would be interested in collecting, but we could.

COMMISSIONER FRIEDKIN: That we want to [indiscernible].

COMMISSIONER FALCON: I have a question. A while ago, you said that we were having to input data that was being sent incorrectly. So how, are we assuming that if it is going to be sent electronically, it is all going to be correct, and we are not going to have to fix any of that?

MR. LOCKWOOD: That is a very good question. A lot of the ‑‑ right now, we are at 85 percent of renewing permits that should have been renewed last summer. In fact, their reports were due May 15th. And we still have 15 percent of those reports we have not renewed.

And a big reason for that is because of the errors that are in there. And when our staff enters this data, and the database says oh, there is an error, then naturally they take that and they have to put it aside so they can work on the next person, and not hold up their permit any longer than necessary. And so this stack begins to build over time. And as you know, once you do that, then it takes quite a bit more time to eventually dive back into it and start over.

What happens if a user enters the data and the database shows the user that there is an error, the user right then can track down the source of that error and correct it himself. And so that would save us a tremendous amount of time of getting on the phone, calling this breeder and that breeder that he did business with, and this breeder. We can just lay that responsibility on the breeder himself. Because for him to be able to qualify to enter all of his data online, it has to be accurate. So we can then lay that responsibility on accurate data being entered on the user.

COMMISSIONER FALCON: So why don't you just send it back, and say your information is incomplete. Please finish?

MR. LOCKWOOD: That sounds ‑‑

COMMISSIONER FALCON: If I send a bill to an insurance company, they don't finish it out for me. They send it back to me. And they don't pay me until I have made absolutely sure, or they are comfortable with the data in there. So why are we having to finish out applications, and call people around? I don't understand that.

MR. LOCKWOOD: I didn't either for a long time. And I can't tell you that I still do completely. What happens when we notify deer breeders by mail that they have some errors, and we actually tell them specifically what those errors are, it is not uncommon for it to be several months later before we realize we still haven't received the corrections and we need to do a follow-up. Much of the problem that we have right now is ‑‑ with not a high percentage. Right now, again, we are looking at about 15 percent, and about 65 deer breeders from previous years that still don't have current permits. That simply do not respond.

COMMISSIONER FALCON: Don't renew the permits. I bet you would get response right quick. I don't understand why we are doing somebody else's work.

MR. LOCKWOOD: There is ‑‑ I will let Clayton ‑‑

MR. WOLF: Commissioner, for the record, Clayton Wolf. I was just trying to think of some examples where the permittee has an error but it is no fault of theirs. And the difference between the electronic data entry that a permittee does, there is a reconciliation process that takes place in the database, if they are doing it online, to authenticate that that is the right number coming from that permittee at that time.

But those folks that are still doing things on paper, if an individual sells a deer to someone else, they give them the unique ID number. And there is no way of them authenticating that. So someone could legitimately and with a good faith effort, purchase a deer. They take the number, they write it down. They report it. And then when they turn it into us, and we actually enter it into the database, that is when the database tells us, that is not the right number. That number should not come from that deer. So then when we call that individual, they say, well, that is the number they gave me. So then we have to track it. And sometimes, we may be following a deer through two or three individuals because it was poorly tattooed. And so the source of the error is not necessarily the last person that reported it. It could be one or two generations back.

So often, we do have people that, if the source of the error, if they are just not compliant or not reporting that we have ‑‑ we do have a process where we send them letters. And we say, you get this fixed or we are going to be yanking your permit. So it is a hodgepodge.

But the problem is, we had thousands upon thousands of deer that were traded across the state for many years, simply in paper. And there were errors resident in that paperwork all over the place. And it wasn't until several years ago when we decided we were going to have a database reconcile these records automatically.

So that is the benefit also of getting somebody online. Is if they get online, then the computer won't allow them to enter a transaction that is not valid. And so it is also going to cut down on the number of errors that we receive.

COMMISSIONER FALCON: So why are we having to keep track of the individual animals that are sold by a business person out there someplace?

MR. WOLF: We are tracking the animals for disease management purposes. Back with the discovery of CWD around 2000, east of the Mississippi, there was a lot of concern about animals being brought into Texas, or moved across the United States. You also had things like TB and mad cow disease. And ag agencies and wildlife agencies all together were looking at these animal movements. In fact, the federal government, there was really a big push several years ago for a national animal ID system that you may be aware of, where there is a unique identifier.

The purpose is, is if you come up with an animal that has a reportable disease, whether it is tuberculosis or whatever, you need to know where that animal came from, so that you don't implicate everyone that is involved in that trade. You basically go to the source.

And so that unique identification system basically is our ‑‑ is equivalent to the national animal ID system that we use, so that we can track an animal. So that if we find tuberculosis, foot and mouth disease, or CWD, we actually know where that animal went.

COMMISSIONER HOLT: Or came from.

MR. WOLF: Or has been. Came from, right. And all of the parties that might be implicated. And then at that point, we bring in the Texas Animal Health Commission, and they would issue hold orders on those properties. And we basically, there would be a lockdown until we figured out which parties might be involved, and which parties could enter back into commerce.

It is a very data-intensive permit. It is our most ‑‑ that is why I think Mitch made the comment. He is not sure what else we could gather. Because of all our permittees, this is the most data-intensive permit we have.

COMMISSIONER FALCON: Maybe I could continue this after. Because I know everybody is starting ‑‑ it is the end of the day. I will just talk to you.

MR. WOLF: You bet.

COMMISSIONER FALCON: Okay. Thank you very much.

COMMISSIONER HOLT: Ralph, can you live with the dollar amounts? Because the overall dollars don't change much. You are talking about maybe $10,000 versus $20,000 or so. It is not a lot of dollars overall. I understand your issue. But, or do you want to change it?

COMMISSIONER DUGGINS: Yes. I can live with it. I just question that we are really going to achieve the savings that you think you are, because of the issues you are talking about. I think you are still going to see errors that are going to require staff time, and you are going to end up going in the hole by cutting it by as much as you are talking about cutting it. But if you don't think that is the case, I will rely on your judgment.

MR. WOLF: Well, and then one thing I will tell you, and Mitch was right. We are ‑‑ we are having to do some level of estimation here. And we do have ‑‑ we do track our time. And if we see down the road that our estimates were wrong, we would surely come back and propose a different fee structure. Because our intent is not to add any financial burden to the agency.

COMMISSIONER HOLT: And push this, to try to create incentive.

MR. WOLF: Yes, sir.

COMMISSIONER HOLT: You need this to go electronic. At some point, inside a year, you need to start telling them, in the next year or two years, it is going all electronic.

MR. WOLF: All of this is contingent upon how many people decide to go from paper to online.

MR. LOCKWOOD: Our revenue continues to increase annually, and the number of permittees we have has been increasing 20 percent annually for the last several years. And we do expect our fixed costs to go down, and start to shift some of this effort that we are putting into this program into some of the other permitting programs that are even farther behind on.

COMMISSIONER HOLT: Uh-huh.

MR. LOCKWOOD: So I think we will see a reduction in costs. Eventually, it could be that this first year, there is some more time that goes into training some of these people on how to use the online system. There may be some time that we are not anticipating. We will find out.

COMMISSIONER HOLT: Anything that's data-intensive should be electronic. You need to push them to that.

COMMISSIONER FALCON: Thank you all very much.

MR. LOCKWOOD: Thank you.

MR. WOLF: Thank you.

COMMISSIONER HOLT: It all should be electronic.

COMMISSIONER FALCON: One more item, Mr. Chairman, and then we will be ‑‑

COMMISSIONER HOLT: You got the tail end this time.

MR. SMITH: Mr. Chairman, will you authorize us to get permission to publish in the Texas Register?

COMMISSIONER FALCON: I certainly make that recommendation.

(Simultaneous discussion.)

MR. SMITH: Thank you.

COMMISSIONER FALCON: Committee Item 5, the audit reports. Mr. Contreras, thank you.

MR. CONTRERAS: Good afternoon, Commissioners. For the record, my name is Carlos Contreras. I am the Director of Internal Audit.

Back at the start of this fiscal year, Scott Boruff and Walt Dabney and I had some conversations about trying to limit the focus of the state park audits that we were going to perform this year, given the fact that we had a requirement from the State Auditor's Office to go and review the parks in '08 and '09. Given that, we mutually agreed, excuse me, that we would audit half of the parks each year, so that we would go through the parks in our formal risk assessment completely in a two-year period.

So given that we had 86 state parks in our formal risk assessment of which this fiscal year, we conducted 42 audits at 42 parks. We did the work in seven rounds of six parks apiece. And our criteria was the same as in previous years. It was a compliance with the fiscal control and visitation reporting plans.

This year, what we did was, we went back to some of the parks that had been compliant in '08 and '09 early on, and we also went to some of the parks that we didn't visit during fiscal year '08 and '09. Another thing that we added was that the test weeks weren't announced to the parks until the audit team was on site.

COMMISSIONER HOLT: Good.

MR. CONTRERAS: The results of the audits; we conducted 42; 35 of the parks were compliant with the fiscal control and visitation reporting plans. Six of the parks were ranked as least severe. We didn't have any parks that were moderately severe or in the most severe category.

The one outlier was Parrie Haynes Ranch. We did perform an audit of the facility, but we didn't rank it. There were some extenuating circumstances for that.

That was due to the fact that there was a transfer of Parrie Haynes Ranch to the State Parks Division on 9/1 from the Communications Division. And the facility really didn't have their management team in place at the time.

So we did the audit. We didn't rank it. But we provided the results to Rodney Franklin, who is the Regional Director, and to the park superintendent. And as far as state park audits that were complete for this year, the overall compliance rate was over 85 percent.

COMMISSIONER HOLT: Wonderful. We are getting there, huh, Carlos?

MR. CONTRERAS: Yes, sir.

COMMISSIONER HOLT: And Walt.

MR. CONTRERAS: Current other projects that we have currently, and I expect to get ‑‑ you will be seeing a lot of these reports coming up in the next few weeks. We have in the reporting stage an audit of the accounts payable function. We also have, and this report was released yesterday, both internally and externally. And that is, Texas Administrative Code Chapter 202, it is a compliance review. The TAC 202, or the information security standards that are applicable to all state agencies. So that was a baseline of a compliance that we did for IT.

We have been conducting law enforcement cash-handling audits. We did that in two rounds. We conducted one round in February. Each of nine offices. That report should be coming out in the next few weeks. The second round, we have conducted our field work, and we are in the review process currently. And you will probably see that report out sometime in late April.

We have two audits that we are starting. One of them is an audit of selected federal grants in the planning process. We plan to have an entrance conference next week for that. Not only is it a review of compliance for federal grants, but it is also, we are going to examine the agency's internal control structure and processes that are in place to handle these grants. So we are going to look at the grant process from the time that there is the actual application for it, and the approval process through the agency, and all the way into the work, the coordination with Administrative Resources and the tracking for various financial oversight bodies.

The second audit that we just kicked off last week, we had our entrance conference, and this is an audit of IT general controls over selected division applications. The three applications that we chose were TLC, BRITS and the law enforcement system. And IT general controls, it is also going to involve the IT Division, George's shop. And the coordination that they have with IBM under the data consolidation services.

COMMISSIONER HOLT: Your favorite.

MR. CONTRERAS: Some additional assignments, we completed the public funds information act compliance review, which is a mandated review that examines whether the agency had any investments that they made. I can just tell you that right now, that it was more of a formality.

My predecessor has decided to continue with that compliance review for the fact that even though the Comptroller is the one that is the agency that houses our funds, and there is really no investments, even though we do have an investment officer.

The second is, we have provided some onsite assistance to Internal Affairs for the work that was conducted in one of the law enforcement offices in East Texas.

I wanted to talk a little bit about the follow-up process. And since we are internal auditors, we have a performance standard stating that we must have a follow-up process to monitor and ensure that management actions are taken to implement our recommendations, or that senior management has accepted the risk of not taking any actions to mitigate those risks.

So the process that we have set up will be conducted every six months beginning in April and in October. We will start contacting the divisions' responsible parties and management via email. We will provide, within that email, a matrix where the responsible parties can supply a narrative and they can also supply us with supporting documentation so that we can assess the level of implementation of each of the recommendations. We will take a look at it; we will work with the individual divisions, and determine the progress of the implementation. And the follow-up process continues until successful implementation or there is mitigation by other means, or acceptance of the risk.

And after we perform this follow-up in April and October, I should have a report to show you where we are, where we stand on the individual recommendations from the audits that have been conducted.

And finally, there are two initiatives that we are undertaking. And these are due to a new professional standard that we have on governance. The first one is going to be an assessment that our office is going to make as to whether information technology governance sustains and supports TPWD strategies and objectives.

Originally, we had planned to do an audit of this. But in conversations with George Rios and IT, internally, the agency is making some changes to the information technology steering committee, and some of the governance processes.

So rather than conduct an audit, what we are going to do is, we are going to make this assessment, gather this information and supporting documentation. And we are going to throw it into the mix for the upcoming audit plan, and see how it rises there in the scoring, to see whether we do conduct an audit. But rather than go in now, I think we need to give IT some time, IT and management some time to effect those changes that they want to.

The second is an evaluation of the design implementation and effectiveness of our ethics-related objectives programs and activities. And I have been in contact with Ann Bright, our General Counsel, and spoken to her briefly about that. My idea on proceeding with this is probably be, we'll develop a survey and conduct a survey and use that information from the survey to provide some recommendations or as far as you know, taking a look at policies, taking a look at the coordination between ethics, fraud, waste and abuse, and tone at the top. Things of that nature.

COMMISSIONER HOLT: On ethics, you are talking about compliance, those kinds of things relative to ‑‑

MR. CONTRERAS: Yes, sir. Compliance. What kind of programs we have. I think really critical is the tone at the top.

COMMISSIONER HOLT: I am worried about that.

MR. CONTRERAS: It is probably better ‑‑ it is not really a quantifiable thing, a really easily quantifiable. It is more of a subjective thing. So a survey probably works better.

COMMISSIONER HOLT: Well, that is why I ‑‑ yes.

MR. CONTRERAS: Than a straight audit.

COMMISSIONER HOLT: I guess, what I imagine. Yes. Okay. And I guess somewhat you would work with HR maybe on that? Because as you said, it is more of a subjective-type survey.

MR. CONTRERAS: Yes, sir.

COMMISSIONER HOLT: Almost one of those 360s or something. Okay.

MR. CONTRERAS: That concludes my presentation. Are there any questions?

(No response.)

COMMISSIONER FALCON: Carlos, thank you so much for your hard work.

COMMISSIONER DUGGINS: Is that customary for audit? This is not a criticism. Is that customary for an auditor to get into what the Chairman was just asking about? Seems to me, the HR center ‑‑ what are the ethics guidelines in that setting?

MR. CONTRERAS: Yes. Well, this is a new standard that just came out at the beginning of this year.

COMMISSIONER DUGGINS: State imposed or GASB standard?

MR. CONTRERAS: No, sir. It is Institute of Internal Auditors. It is our professional practices framework.

COMMISSIONER DUGGINS: Okay.

MR. CONTRERAS: They just put that out there. One section looks at the IT governance and whether it supports or sustains our mission. The second is the evaluation of the ethics programs and policies. And then the third has to do with consulting activities. We don't really perform a lot of consulting activities. We don't perform any consulting activities here per se. So it is the two areas that I pointed out that are new.

And to be quite honest with you, this is new for the audit community. So we are also ‑‑ this is a learning process for us. Different agencies have addressed these requirements in different manners. And you know, it is really a learning process for our profession right now.

COMMISSIONER DUGGINS: Thank you.

COMMISSIONER HOLT: Great. Congratulations on the parks, to you and Walt and all of your regional guys, and everybody, because I know it has been ‑‑ now we are going to put the new system in place. It is kind of like starting over again, isn't it.

Oh, well. That is why we all have gray hair. At least we have some hair. I am not picking on anybody, but I am losing it like crazy. And I think Parks has been half of it, Walt.

(Simultaneous discussion.)

COMMISSIONER HOLT: I am teasing you guys. I am trying to get a little lightening. We need a little levity here. God almighty, it has been ongoing all day long. Anyway, appreciate it, Carlos. I am glad to see the progression; it has been tremendous.

COMMISSIONER FALCON: Mr. Chairman, this Committee has completed its business.

COMMISSIONER HOLT: Oh, I get to do this. We are adjourned.

(Whereupon, the meeting was concluded at 4:30 p.m.)

C E R T I F I C A T E

MEETING OF: Texas Parks and Wildlife Commission
Finance Committee
LOCATION: Austin, Texas
DATE: March 31, 2010

I do hereby certify that the foregoing pages, numbers 1 through 50, 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.

04/06/10
(Transcriber) (Date)
On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731


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