0001 1 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 2 TEXAS LOTTERY COMMISSION 3 BINGO ADVISORY BOARD MEETING 4 DECEMBER 4, 2003 5 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 6 7 8 9 10 11 12 13 14 15 16 17 18 19 BE IT REMEMBERED that the TEXAS LOTTERY 20 COMMISSION meeting was held on the 4th of December, 2003, 21 from 10:02 a.m. to 1:08 p.m., before Michelle M. 22 Robertson, CSR, RPR, in and for the State of Texas, 23 reported by machine shorthand, at the offices of the 24 Texas Lottery Commission, West 6th Street, Austin, Texas, 25 whereupon the following proceedings were had: 0002 1 APPEARANCES 2 3 Larry Whittington (Dallas, Charity) 4 Billy Atkins (Charitable Bingo Director) 5 Virginia Brackett (Lubbock, Charity) 6 Patricia Greenfield (Fort Worth, SSP) 7 Mario Manio (Garland, Commercial Lessor) 8 Pete Pavlovsky (Rosenberg, Charity) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 INDEX 2 Page 3 Appearances ...................................... 2 4 AGENDA ITEMS 5 Item Number 1 .................................... 4 6 Item Number 2 .................................... 4 7 Item Number 3 .................................... 10 8 Item Number 4 .................................... 15 9 Item Number 5 .................................... 72 10 Item Number 6 .................................... 5 11 Item Number 7 .................................... 106 12 Item Number 8 .................................... 108 13 Item Number 9 .................................... -- 14 Item Number 10 ................................... -- 15 Item Number 11 ................................... -- 16 Item Number 12 ................................... -- 17 Item Number 13 ................................... -- 18 Item Number 14 ................................... -- 19 Item Number 15 ................................... -- 20 Item Number 16 ................................... 116 21 22 Reporter's Certificate ........................... 118 23 24 25 0004 1 DECEMBER 4, 2003 2 MS. BRACKETT: It's about two minutes 3 after 10:00, so we will call the meeting to order. Does 4 anyone need to turn in a witness affirmation form? Just 5 bring them up here and put them in the box as you need 6 to. The first order of business is consideration of the 7 minutes of the last meeting which was -- we do have 8 three absences today, and the first is Jack Dougherty, 9 Danny Moore, and Suzanne Taylor are the three who are 10 not here, but we do have a quorum so. And then we do 11 need to make -- to vote on the minutes of the last 12 meeting. Anyone have any corrections to it? Any 13 changes? Then are the minutes approved as they were 14 printed and distributed? Okay. Then the minutes are 15 approved as printed and distributed. 16 The first item of business is 17 consideration of and possible discussion and action on 18 the license and rule making. And is Bruce Miner -- 19 MR. ATKINS: We're actually missing -- 20 MR. OLDHAM: Madam Chair, for the record, 21 my name is Kevin Oldham. I am the assistant general 22 counsel here at the lottery commission. And if I can 23 request your permission to skip to item 6, if that's 24 okay, and then come back to item 3. We have a couple of 25 people that are still talking. They are on their way 0005 1 down, and just to keep things moving, if that's all 2 right with the committee, move to item 6. 3 MS. BRACKETT: Does anyone have any 4 objections to moving to item 6? 5 MR. MANIO: No. 6 MS. BRACKETT: All right. Then we will 7 move to item 6. 8 MR. OLDHAM: Thank you. 9 MS. BRACKETT: And item 6 is consideration 10 of and possible discussion or action on proposed 11 amendment to 16 TAC 402.558 regarding bingo paper. 12 MR. OLDHAM: Thank you, Madam Chairman. 13 Good morning, committee members. Again, my name is 14 Kevin Oldham, assistant general counsel here at the 15 lottery commission. You have been provided several 16 documents in your notebook, as well I provided a 17 loose-leaf copy of an amended draft rule for 16 Texas 18 Administration Code 402.558 related to bingo card and 19 paper. 20 To give you a little background, on 21 October 28th, commission received a request for rule 22 making from American Games, Incorporated. Its 23 specificity, what American Games is asking, is that the 24 current requirement that the serial manufacturer 25 assigned serial number be contained on the face of bingo 0006 1 paper, that an exception be made for break-open bingo 2 paper because if the serial number is on the face of the 3 bingo paper, it would not be known until bought, opened, 4 and played. They provided some language, and a copy of 5 the letter from American Games is in your -- is in your 6 notebook. Subsequent to that, the letter was presented 7 to the Texas Lottery Commission at the November 24th 8 meeting last month. And at that date, the commission 9 executed an order to initiate the rule making process. 10 What that means is that based on the statute, which is 11 also provided in your notebook, the commission could 12 either grant the petition for rule making and initiate 13 the rule making process or deny the petition and state 14 the reasons in writing why that petition should be 15 denied. 16 The commission decided to engage in the 17 rule making process. The reason we're before you here 18 today is to solicit comment and perhaps a recommendation 19 regarding the proposed amendment, and to perhaps make a 20 recommendation to the Texas Lottery Commission that they 21 publish the proposed amendment in the Texas Register for 22 public comment for a period of 30 days. The rule before 23 you -- we are on a tight deadline. Under the statute, 24 the commission has a 60-day period from the October 28th 25 date in order to file the -- file the rule with -- in 0007 1 the Texas Register. And so what we're looking for today 2 is perhaps some comment on the suggestive language and 3 possibly a recommendation to the Texas Lottery 4 Commission. 5 With that, I will -- I will make one 6 notice. There is a slight change in the language that 7 was submitted in the letter from American Games on 8 October 28th. If you will notice in that letter, on 9 page -- page 2 at the very end, I guess it is about the 10 second to the last paragraph where it begins with the 11 statutory language, Section 402.558(B(2)(b). If you 12 will note, the highlighted language says, in the case of 13 break-open bingo, which shall contain the serial number 14 assigned by the manufacturer on the outside so as not to 15 be concealed, staff has looked at that and made the -- 16 made a suggestion that that be changed from shall to may 17 to provide that the serial number may be either on the 18 face of the break-open bingo or on the outside to make 19 it permissive as opposed to required. 20 With that said, I would like to open it up 21 for any comment that you have for the staff regarding 22 this issue or any questions you might have. 23 MS. BRACKETT: Charles Hutchings, you said 24 you would like to speak on this issue, item number 6. 25 MR. HUTCHINGS: Item 6? 0008 1 MS. BRACKETT: Yes, sir. We are taking 2 them out of order. 3 MR. HUTCHINGS: Not at this time, I am not 4 ready. I saw it on the agenda, but I haven't -- thank 5 you. 6 MS. BRACKETT: Go ahead, Mario. 7 MR. MANIO: I just have a question on the 8 use of the term break-open because it seems to me that 9 only this particular company is using the word 10 break-open. Other companies use the term like pop open. 11 So just as a matter of semantics, we can probably find a 12 generic term for this type of bingo card instead of 13 calling it break-open. 14 MR. OLDHAM: What we will do is we will 15 look at that and use the term that is either in the rule 16 that describes this type of paper, or the statute. So 17 we will make that consistent. That's a good point. 18 MS. BRACKETT: So what you are asking him 19 is the difference between shall and may, which shall 20 means you have to, and may means you can, if you want 21 to? 22 MR. OLDHAM: That is one of the issues, 23 correct. 24 MS. BRACKETT: Any other comments? Is our 25 action on this that we need to approve change in the 0009 1 shall to may in this -- 2 MR. OLDHAM: Madam Chair, what we are 3 asking the committee to look at today is the language 4 itself, see if there are any comments, anything stands 5 out to you. Based on our tight deadline and the 6 statute, we are going to have to propose this for rule 7 making at the next commission meeting, the December 8 commission meeting, but we wanted to give the committee 9 an opportunity to have a chance to discuss this and make 10 any comments. So it is not limited just to the may or 11 shall, but anything you see in the proposed highlighted 12 language, or that actually it's the underlying language 13 in the loose-leaf copy of the rule that has been 14 provided. 15 MS. BRACKETT: Mario, did you have any 16 further comments on this? 17 MR. MANIO: Well, what I wanted to say is 18 that this seems to be a reasonable request, and it 19 appears to me that the language in question is the one 20 that's underlined on the attachment that you provided 21 us, and it looks okay to me. 22 MR. OLDHAM: Thank you. 23 MS. BRACKETT: All right. So do we want 24 to recommend that this be published for comment in the 25 Texas Register? 0010 1 MR. MANIO: Yes. 2 MS. BRACKETT: Is that the consensus? All 3 right. Then we recommend that it be published for 4 comment. 5 MR. OLDHAM: Thank you, Madam Chair. 6 (End of item 6.) 7 MS. BRACKETT: Commissioner Cox, it is 8 nice to see you here. 9 MR. COX: Thank you. It is nice to be 10 here. 11 MS. BRACKETT: Thank you. We appreciate 12 your attendance. We go now to item 2 on the agenda 13 which -- 3, I'm sorry, 3, which is the consideration of 14 and possible discussion on action -- and/or action on 15 license and rule making. And this is regarding the 16 temporary license rule. 17 MR. MINER: Madam Chair, my name is Bruce 18 Miner. I'm the licensing manager for the bingo 19 division. And this morning, I would like to start by 20 presenting a request to review Rule 402 relating to unit 21 manager. Subcommittee met that is composed of yourself, 22 Patricia -- 23 MR. ATKINS: Sorry. Bruce, we are on item 24 3. Unit manager is contained under item 4. 25 MR. MINER: Okay. I'm sorry. I apologize 0011 1 for my confusion because it is real all-encompassing 2 because of the licensing rule making. We addressed 3 three additional rules at our subcommittee as well. We 4 discussed them at draft language, and we are in the 5 process of reviewing those through legal, and they are 6 not ready for discussion at this time. So my 7 recommendation is that we plan to have that available at 8 the next meeting. 9 MS. BRACKETT: And that is the temporary 10 license rule that you are talking about? 11 MR. MINER: Well, there is three of them 12 there in a row that we summarized. 13 MS. BRACKETT: All right. 14 MR. MINER: I skipped -- the temporary 15 license rule that we discussed was trying to incorporate 16 requirements in House Bill 2519, plus streamline the 17 process. So you would look at one location for 18 temporaries, and that would affect some other rules, so 19 it became a lengthy process that we are still working. 20 The other one we reviewed was the Bingo Occasion Rule, 21 which related to House Bill 2519, and that would address 22 amendments and cover those requirements in the act. 23 And the third one we also discussed was a 24 change of license records process to change the 25 information on the files, and that was being looked at 0012 1 as well. 2 MR. ATKINS: And my understanding, 3 members, is that the subcommittee that met on these has 4 essentially agreed with the language that's included in 5 the memos that are in your notebook, and they have been 6 forwarded to the legal division for drafting those 7 comments and concepts. And Penny Wilkov is the staff 8 attorney assigned to these, and she is prepared to 9 discuss the process that those rules have gone through. 10 MS. WILKOV: I will just briefly comment 11 on Mr. Miner's discussion. My understanding is the 12 mission of these licensing rules, licensing issues as is 13 presently in the draft form is to incorporate all of the 14 provisions relating to one subject into one rule so 15 that, for instance, if somebody wanted to find out the 16 provisions about temporary licenses, they could look in 17 this one particular rule to find out what -- what that 18 encompasses. Some of the aspects of the, for instance, 19 the temporary licenses are already contained in other 20 rules. 21 So what this involves -- and we have 22 talked to the general counsel about it, is to try to 23 remove language from some of the other rules and 24 incorporate it into this one all-encompassing rule. So 25 that if anybody wants to know about one particular 0013 1 practice of the commission, or one, you know, aspect of 2 the statute and our interpretation thereof, they could 3 look in this one provision. And so it is a little more 4 of a complex and lengthy process than was initially 5 thought. So we are trying to figure out where they are 6 in the rules and moving them. We may have to come 7 forward on more than just this aspect of it. 8 MR. ATKINS: I don't know if you want to 9 comment, Madam Chair, I think you were the chair of the 10 work group that worked with these on Bruce. I will go 11 back a little bit to what he was referring to earlier in 12 his comments. There is I think a couple of things we 13 can do. The committee, through the review of the 14 information that is in the notebook now, can recommend 15 that once those rules are drafted by legal, that they 16 move forward to commission for publication and public 17 comment. 18 If the advisory committee still wants 19 those rules to come to them before then, then -- and I 20 think this will fall under item 15, there will be a need 21 for a meeting in January so that those can be presented 22 at that time to be kept moving forward. There was some 23 discussion at the commission meeting, wasn't in October, 24 November -- I believe it was October, and the commission 25 did express a desire that these rule making processes be 0014 1 kept moving forward. So those are the two options that 2 we came up with that we make available to you, unless 3 there are others you had to consider. 4 MS. BRACKETT: So you are recommending to 5 the group, your committee is recommending that -- or the 6 staff, that we -- once you get them drafted, that we 7 just move forward on them if you have the permission 8 from -- or if that is the agreement of this group, the 9 Committee, Bingo Advisory Committee? 10 MR. MINER: Correct. And it be either 11 through your approval that it goes to commission or your 12 discussion at the next commission -- I am sorry, the BAC 13 meeting, if you have one in January. 14 MS. BRACKETT: Okay. Let me see if 15 anybody wanted to make a public comment on this. This 16 is item 3 or 4? 17 MR. ATKINS: 3. 18 MR. MINER: It is 3. 19 MS. BRACKETT: How does the -- how does 20 the committee feel about this? I feel like -- I feel 21 like it is a good recommendation to keep us moving. Is 22 that general consensus? 23 MR. PAVLOVSKY: Yes. 24 MS. BRACKETT: All right. And we have 25 approved that action through general consensus of the 0015 1 committee, the Bingo Advisory Committee. 2 MR. MINER: Are you ready to move on to 3 item 4? 4 MS. BRACKETT: Right. If you feel like 5 that you have gotten the direction that you need that 6 will expedite the situation. 7 MR. MINER: Yes. If I understand that if 8 we have a meeting in January, it will come before then 9 with our recommendations. And if there isn't one, we 10 will have the information presented to you so we can 11 present it at the following commission meeting. 12 MR. ATKINS: And I mean, I don't know 13 where they are in the process. It could be that they 14 could be eligible for the meeting in December. I don't 15 know. But you know, if that's -- if that was the case, 16 they can be on that agenda. 17 MS. BRACKETT: Now, by "the meeting," you 18 are referring to the Texas Lottery Commission? 19 MR. ATKINS: Yes, ma'am. 20 MS. BRACKETT: Not the bingo? 21 MR. ATKINS: Yes, ma'am. 22 MS. BRACKETT: And you are going to -- 23 does that conclude your report? 24 MR. MINER: Related to item 3, I am 25 satisfied with that. 0016 1 MS. BRACKETT: All right. Did you want to 2 report on another item? 3 MR. MINER: Yes, please. The following 4 one, item 4, related to rule regarding the unit manager, 5 and was repeating that it was made up of yourself, 6 Patricia Greenfield, myself, and legal counsel. And we 7 discussed it. And at that time we had full agreement. 8 It is basically implementing the requirements in the act 9 of Section 2001.437, which basically states that a new 10 license make application post bond. And this is just a 11 simplified process identification to do so. And it 12 would be our recommendation that you recommend to the 13 Texas Lottery Commission that this rule be published in 14 the Texas Register for formal comment. Are there any 15 discussion? 16 MR. ATKINS: Well, again, I think 17 Ms. Wilkov wants to provide -- and just, members, for 18 your benefit, there are two items or two topics under 19 this agenda item, and what Bruce and Penny are 20 discussing right now is the first one, which includes 21 his cover memo, and then a copy of the draft rule. The 22 last page is for the next item and isn't a part of this 23 current discussion. 24 MS. WILKOV: Thank you. Madam Chair and 25 committee members. And for the record, my name is Penny 0017 1 Wilkov. I am the assistant general counsel with the 2 Texas Lottery Commission. And I am here to address the 3 committee concerning the unit manager rule and basically 4 the process that went into crafting this rule. And 5 today, we are asking for your input, advice, and counsel 6 on the language on the points of discussion with the 7 unit accounting rule making, and we are asking that you 8 ultimately recommend that the Texas Lottery Commission 9 publish the rule on unit manager in the Texas Register. 10 And if I may, let me review the process that went into 11 crafting this proposed rule with the unit manager. The 12 Bingo Enabling Act, Section 2001.057, states that the 13 Bingo Advisory Committee may comment on rules involving 14 bingo during their development and before final 15 adoption. 16 The Bingo Advisory Committee met on June 17 19th, 2003, where subcommittees were formed, and at that 18 meeting, Chairman Clowe and Mr. Atkins both briefly 19 discussed their vision of the role of the BAC in the 20 process in forming these subcommittees and rule making, 21 and stated that these subcommittees would bring to the 22 table input, advice, and counsel on these rules. The 23 unit manager rule has been part of the ongoing 24 discussions which have occurred as part of the unit 25 accounting rule. Unit accounting issues, including the 0018 1 unit manager, were part of the initial Bingo Advisory 2 Committee subcommittee meetings held on July 10th, July 3 30th, and August 6th, where the preliminary discussions 4 occurred on these unit accounting issues. And although 5 Bruce Miner was not as involved in these preliminary 6 discussions, Phil Sanderson and myself participated in 7 both these licensing subcommittees and the unit 8 accounting subcommittee meetings that occurred and 9 brought that level of continuity to this process. After 10 the BAC meeting in August, we did look at the 11 transcript, and the unit manager issues were discussed 12 at great length, and particularly in the context of a 13 bond that would be required. 14 And thereafter, the staff reviewed the 15 transcript and went back to the table to discuss the 16 issues that are part of this unit manager rule that you 17 have in front of you. We have had discussions with Mr. 18 Bresnen, and Mr. Fenogino, and an IRS agent who is 19 assigned to the Texas Lottery Commission to discuss the 20 possible ramifications of the unit accounting issues 21 with the 501(C) exemption. And we are still basically 22 working on those issues. And we have drafted both a 23 unit manager rule, and we have brought forth some issues 24 that have been part of the discussion on the unit 25 accounting. 0019 1 An issue that I anticipate may be raised 2 today is why we don't have a proposed rule in the unit 3 accounting at this time, which is rather a novel concept 4 considering that most of the industry is always asking 5 us, you know, why we have a rule. So anyway, I can tell 6 you this, though, with other rules, we look at other 7 states to see what their language is that is contained 8 in their rules. We take their best stuff. We refine 9 it. We talk about it and discuss it. And we -- then we 10 come out with what we consider to be a benchmark rule in 11 the industry on this particular area. 12 With unit accounting, there is no such 13 animal. There is no other states that have anything 14 like this. So it is rather a novel approach. And we 15 have been struggling, quite frankly, with the issues. 16 And prior to coming to the commission, to the Texas 17 Lottery Commission, we want to make sure that we can 18 tell the commission members that we have put our best 19 efforts forward to try to craft a rule that, you know, 20 deals with both the issues that are foreseen and 21 unforeseen. 22 And at least we have identified the 23 consequences. So that is why we are bringing forth 24 this -- some of these points of discussion on the unit 25 accounting, and it is not actually solidified into a 0020 1 rule, just so we can get your advice, counsel, and 2 comments from the industry perspective on the issues 3 that are identified or that we have not foreseen. But 4 as far as the unit manager rule, today we are asking you 5 to provide again input, advice, and counsel on the unit 6 manager rule, as well as the points of discussion with 7 the unit accounting rule making. And ultimately, we 8 would ask you to recommend that the Texas Lottery 9 Commission publish the rule on unit manager in the Texas 10 Register. 11 MS. BRACKETT: Okay. Does anyone on the 12 committee want to make a comment before we ask for 13 public comment? 14 MR. MANIO: I will reserve my comment 15 after the public comment. 16 MS. BRACKETT: Okay. Don Webb. Okay. 17 Darleen Mashburn. 18 MS. MASHBURN: I'm Darleen Mashburn, 19 Minnehaha, counsel number 23, approved order of Redmen. 20 Regarding the unit accounting rule or the unit manager 21 rule, I have two problems with this rule. C, the bond 22 or security is posted by the unit manager pursuant to 23 Occupation Code Section 2001.514. How much is the bond? 24 Has anybody ever specified that, how much the bond will 25 be? My second problem is Section C, annual license fee 0021 1 for unit manager. The nonrefundable annual license fee 2 for unit manager may not exceed a thousand dollars. 3 Well, how much? I mean, it is going to be $2? Is it 4 going to be $999.99? I would like to see more 5 description here before y'all pass it on to the lottery. 6 MS. BRACKETT: Thank you. Bruce, do you 7 want to comment on the bond and the fees? 8 MR. MINER: I believe it is based on 9 gross -- the prize -- thank you, the prize fees. 10 MS. SHANKLE: Good morning. How are you? 11 My name is Terry, T-e-r-r-y, Shankle, S-h-a-n-k-l-e. I 12 am the accounting services manager. 13 MS. BRACKETT: This morning, you are the 14 hero to the rescue. 15 MS. SHANKLE: The bond portion is in the 16 bond rule that is being written -- well, has been 17 proposed, and it was rejected to go forward. So the 18 unit accounting manager bond information is -- is 19 included in that rule, that particular rule. And it is 20 three times -- I have not looked at it in a while, three 21 times the average of the unit itself, what their prize 22 fees for those organizations have been or will be 23 basically. 24 MS. BRACKETT: Prize fees? 25 MS. SHANKLE: Yes, ma'am. 0022 1 MS. BRACKETT: Okay. So it is three times 2 what the average prize fee for the unit is? 3 MS. SHANKLE: Yes, ma'am, that is correct. 4 What we will do is look at each organization that makes 5 up a part of the unit, determine what their average 6 prize fees are, add those up, divide by four, multiply 7 by three, and we get the -- 8 9 MS. GREENFIELD: May I? 10 MS. BRACKETT: Yes. 11 MS. GREENFIELD: I think we talked 12 about the -- 13 MS. BRACKETT: Identify yourself, please. 14 MS. GREENFIELD: I'm Patricia Greenfield. 15 We talked about this at the last -- sorry. We talked 16 about this at the last meeting, and this was something 17 that I had a problem with the bond and thinking it might 18 be so high that, you know, nobody is going to want to be 19 a unit manager. So we did discuss that at the last 20 meeting. And it is still in here. And I don't know if 21 there is a three times -- there is a number going to be 22 to that. It is just however many units you are a 23 manager of, and you just have to keep posting a bond; is 24 that correct? 25 MS. SHANKLE: That is correct. Because 0023 1 we -- if you have -- the average quarterly prize fee for 2 an organization is approximately $5,000. And so if you 3 have five organizations, that's $25,000 that could be 4 delinquent to the state of Texas, and we have to ensure 5 that that fee is secure. So yes, it is isn't -- 6 MR. WHITTINGTON: Could I ask a question. 7 These bingo halls have been in existence for a long 8 time. They have been dealing with the same charities 9 for a long time. I thought a unit accounting was all 10 about putting the charities together so that everybody 11 gets the same amount of donations after a certain point, 12 without touching anything else. They have got to be ran 13 the same, and it is not going to be too much difference 14 in running. All we are doing is just putting these 15 charities together and coming in one bank account, and 16 then disbursing the donation equally, basically. I 17 mean, that's what I thought the unit accounting was 18 going to be all about, and not touching monies from 19 other people trying to come up with fees and bonds and 20 all this stuff. Because these same people are going to 21 be running the same organization just like they run it 22 now. So that is what general accounting is all about. 23 MR. ATKINS: I don't think your 24 interpretation of what unit accounting about is wrong. 25 You know, when you talk about all these separate 0024 1 organizations, now, you are talking about going from 2 these separate organizations to one individual that is 3 going to have responsibility for those funds 4 essentially. And we have an obligation under state law 5 to protect the states. And if those funds are going to 6 be -- if there is, you know, we have to have the ability 7 to collect on those funds, if need be. And I appreciate 8 the fact that there are some organizations that have, 9 like you say been together for 20 years. I understand 10 that. There are also some organizations that have been 11 in existence for 20 years, and it turns out that someone 12 that has been working for them has been stealing from 13 them that whole time, but they don't find out about it 14 until some time later. So that's the reasoning behind 15 that. And the requirement in the State law that -- that 16 we have those bonds. 17 MR. WHITTINGTON: Well, I understand what 18 you are saying. If somebody got somebody like that in 19 their organization, they should know that right away, I 20 think, if they are working with these people as well. 21 MS. SHANKLE: Well, I think that in the 22 August 21st meeting, we discussed that we had done some 23 research and we found that the -- that that is not 24 necessarily true, that you are going to know upfront 25 that someone that you have known forever is stealing 0025 1 from you. It usually occurs that way. 2 MS. GREENFIELD: I think that maybe if we 3 kept the charities required to post the bond, and maybe 4 took it off of the unit manager, but had all the 5 charities that are in the unit still be required to have 6 a bond, maybe that might be a solution to this. Because 7 I really just think that it is going to stop someone 8 from being a unit manager. 9 MS. SHANKLE: Well, my counsel tells me 10 that this is not a point of discussion at this time 11 because it is not up for request to be adopted. 12 MS. GREENFIELD: Okay. 13 MS. SHANKLE: And we will have a lengthy 14 discussion, I am sure, on this at the time that the bond 15 rule. 16 MS. WILKOV: But I would point out, 17 2001.537 states, a person who holds a unit manager's 18 license shall post a bond for other security pursuant to 19 Section 2001.514. So they are required to post a bond 20 on that. 21 MS. BRACKETT: Let me just ask you a point 22 of information. I know when we first got our license, 23 we had to have -- we had to be bonded. And then after a 24 length of time, which I don't recall what it was, but it 25 seems like it was short of always paying on time, we no 0026 1 longer had to have the bond. Would this be a 2 consideration in this or -- 3 MS. SHANKLE: You are absolutely correct, 4 it is a consecutive quarters that it can be released. 5 Ms. Brackett, I don't know. My answer off the top of my 6 head would be no. I would not perceive a unit manager's 7 bond ever being released until which time they are no 8 longer the unit manager. But again, that is off the top 9 of my head. That is my personal opinion. 10 MS. BRACKETT: So what you are telling us 11 is this is not a point of discussion at this time? 12 MS. WILKOV: The bond rule is 13 a separate -- that was a separate rule, and actually, it 14 is an amendment to a rule that was part of the BAC 15 meeting in August, I think that was discussed. That was 16 a big item of discussion. This unit manager is tied up 17 with that, but that particular rule is not in front of 18 you today. Before they would be required to post a 19 bond, we would have to have that sort of information in 20 that rule so that they would know how much bond to post, 21 because there is really no such animal as a unit 22 manager. 23 So that would be part of the baby steps 24 that we are taking on this unit accounting rule is, you 25 know, defining what a unit manager is, and we will 0027 1 define the bond, and we define what a unit -- what is 2 involved with the unit accounting and the recordkeeping 3 and all that other things. So that particular item is 4 not included here today as part of the process. 5 MR. ATKINS: Let me try and clarify for 6 myself. I am not sure whether discussion of the bond 7 rule came up because the comment was on Section 8 2001.514, which is under the Bingo Enabling Act, which 9 references bonds being required. 10 MS. WILKOV: Which is what is included in 11 the statute. 12 MR. ATKINS: That's correct. 13 MS. WILKOV: And we have a clarification 14 of that in our rule, is my understanding of that. 15 MR. ATKINS: Well, the comment, as I 16 understood it, is that the language in the rule didn't 17 identify how much the bond was. And Ms. Shankle's 18 response was, in essence, going to be, pursuant to 19 2001.514, it would be equal to three times the amount 20 due according to the license holder's average quarterly 21 reports. So you can't say the bond will be $5,000 or 22 whatever, because it is going to be different for every 23 organization. But that refers to the statute, not to 24 the bond rule. 25 MS. WILKOV: The 2001.514(B), states that 0028 1 the commission shall set the amount of the bond or other 2 security, taking into consideration the amount of money 3 that it has, or is expected to become due from the 4 license holder, which is part of the amendment that 5 would be -- I'm sorry, that would be brought forward on 6 the -- on the amendment to the bond rule, which is 7 still, I imagine, under discussion. 8 MS. GREENFIELD: So whether or not we have 9 a bond, we have to have it because it is in -- it is in 10 the law, but the part that we can determine is how we 11 come up with the amount for the bond? 12 MS. SHANKLE: No, there is no discretion 13 in there. 14 MS. WILKOV: The statute requires that a 15 bond or security must be posted by the unit manager, and 16 that is part of the statute. So that's addressed here. 17 However, the amount of the bond is covered in another 18 rule, as it is with the other requirements of the 19 bond -- 20 MR. ATKINS: I am sorry, Penny, I don't 21 think -- I'm sorry, I don't think I agree that the 22 amount of the bond is covered in another rule. I think 23 it is covered in the act. And I think the act says that 24 it shall not exceed three times the amount due, because 25 that is the section that is being referred in this rule. 0029 1 This rule isn't referring to another rule. 2 MS. WILKOV: The amount required by the 3 commission may not exceed three times the amount due 4 according to the license holder's average quarterly 5 reports. I think that the thing that needs to be 6 brought forward is what is the expectations as far as 7 the amount due, those types of issues that are tied up 8 with the bond amount to be posted. 9 MS. SHANKLE: And I agree with you, Billy, 10 I understand now where you are coming from. It had some 11 time ago been included in the bond rule, but I think 12 this probably takes care of it being -- 13 MR. WHITTINGTON: Okay. Unit accounting 14 can still be done without a unit manager; right? 15 MS. SHANKLE: Right. 16 MR. WHITTINGTON: Okay. So basically, 17 don't you feel that most -- most people are going to go 18 without the unit manager, the way you-all have got it 19 stipulated here? 20 MS. SHANKLE: I don't think it is the way 21 we have it stipulated. I think it was the way it was 22 stipulated in the act. 23 MR. WHITTINGTON: Well, in the act. 24 MS. SHANKLE: So. 25 MR. WHITTINGTON: Well, either -- 0030 1 either/or. But what I am saying, I basically see the 2 unit manager -- all this definition of a unit manager 3 being useless at the same point because it is going to 4 be so outrageous for them to get a bond for certain 5 things, to look over the organizations, and especially 6 an organization that doesn't have a unit manager. I 7 think a lot of effort is going to be spent on this unit 8 manager stuff. If it is not -- not done right, well, it 9 is going to be null and void up to a certain point. And 10 a lot of work. That's what I see. But it has got to be 11 done, I guess. 12 MS. GREENFIELD: May not exceed, then it 13 could be less than three times, so that's probably 14 something that you are talking about in your 15 subcommittee when you are going over the bond issue, I 16 am assuming. 17 MS. SHANKLE: We will take that under 18 consideration. 19 MS. BRACKETT: Okay. I think we are ready 20 for public comment. Steve Bresnen. 21 MR. BRESNEN: Thank you, Madam Chairman. 22 My name is Steve Bresnen. I am here on behalf of the 23 bingo interest group. I don't think you are ready to go 24 forward with this unit manager rule. And I think it 25 should be clear. What the statute says in Section 0031 1 2001.437, Subsection (F), a person who holds a unit 2 manager license shall post a bond or other security 3 pursuant to Section 2001.514. If you look at Section 4 2001.514, it does not set an amount of security. It 5 says, the commission shall set the amount of bond or 6 security, and the amount required may not exceed three 7 times the amount due. So the commission has 8 historically set the amount pursuant to a rule. If they 9 didn't, they would be determined to be arbitrary and 10 capricious. They would have some schedule for doing so, 11 but they would not be able to enforce it because it 12 would not -- it would be an unwritten rule. 13 Consequently, you need a rule because the 14 statute itself does not set an amount. And I think 15 the -- Ms. Shankle's original explanation is the correct 16 explanation. If this rule is to go forward with the 17 cross reference to the statute, and a person trying to 18 live with this rule looks at the statute, they will do 19 just as Ms. Mashburn does, who is an expert in these 20 matters, and has been handling these matters for years, 21 and be unable to determine how much the bond should be. 22 So that would be number one. 23 Number two, I hear a lot of complaints 24 about these bonds to begin with. While the statute does 25 say that there shall be a bond required, it does not 0032 1 prohibit the commission from reducing that bond when 2 they have some experience with an individual as a unit 3 manager, or looking at the underlying membership in the 4 unit, let's say you had five organizations, and all five 5 of them had been current for 20 years in paying their 6 fees. A reasonable person might expect that those folks 7 would have -- maintain control and be diligent about 8 their unit managers' activities, and so ensure that the 9 proper -- the money was sequestered, and the proper 10 forms were turned in, and the money was remitted. And 11 so you could set the bond amount based on that history 12 with those underlying organizations. On the other hand, 13 if three of them were good to go, and two of them were 14 bad actors, you might set a higher bond. 15 Now, let me just back up and give you a 16 little history. The -- this unit manager -- I mean, the 17 unit accounting concept came out of the industry. It 18 has got some problems, and I think some -- we are making 19 baby steps here. I wish we would had been moving 20 faster. But, you know, I didn't move any faster so I 21 can't blame it on anybody. But -- and we have got some 22 other questions that don't have anything to do with 23 state law that need to get answered as we go forward on 24 this. 25 But the unit manager concept was one that 0033 1 was sought by the agency, by this agency. As we worked 2 this out, we came up with alternative mechanisms for 3 doing this. The agency wanted a licensed and bonded 4 person to be responsible. We sought an alternative to 5 that, which is the designated agent form, where the 6 underlying organizations maintain joint and several 7 liability for the amount of -- of money that's going to 8 be due the agency. I agree with you, Billy, completely, 9 that the state has to be secure in the receipt of its 10 funds, and that y'all have a duty to do that. The 11 question is, how do you do your duty? And it seems to 12 me that what we need really to do is look back some and 13 see, you know, how much money has the state lost over 14 time, you know, and over what period of time, and from 15 what kinds of organizations, and that sort of thing. So 16 the whole bonding deal may need to be looked at in 17 general to cut to the quick here and not go on for too 18 long. 19 I would suggest that this unit manager 20 rule, if it is going to go forward for public comment 21 now, at least have a cross reference to the existing 22 bonding rule because the statute doesn't give you any 23 guidance. It is my understanding that the existing 24 bonding rule doesn't give you any guidance about a unit 25 manager. So I don't see how you go forward on the unit 0034 1 manager concept. I agree with you, Larry, that if it is 2 cost prohibitive or cumbersome, people are not going to 3 do it anyway. They are going to go for the alternate 4 form. That may be a desirable result. It is not the 5 one that I thought the agency wanted when we worked on 6 this language during the legislative session. 7 Do you want some comments on the points of 8 discussion about the unit accounting subject right now 9 or would you prefer to confine yourself to the unit 10 manager portion of this and then we can come back to 11 that? 12 MS. BRACKETT: Let's come back to that. 13 MR. BRESNEN: Okay. 14 MS. BRACKETT: Charles Hutchings, did you 15 want to speak on item 4? 16 MR. BRESNEN: You are just on the unit 17 manager part right now? 18 MS. BRACKETT: Yeah. Right. On the unit 19 manager; right. 20 MR. HUTCHINGS: Good morning. My name is 21 Charles Hutchings. I am with the AMVETS out of Dallas. 22 I will basically echo what has been said here prior. 23 The only other thing I see is in 2, they want just ten 24 days. If you have a problem with your unit manager, 25 that's not -- if you have a unit manager taking care of 0035 1 a unit of charities in a hall, and that person should 2 decide to leave, and they walk out, someone is going to 3 have to pick the ball up, hire another manager, figure 4 out what is going to happen, you know, unless we just 5 send in, you know, to the division that the unit manager 6 has left. But if we are going to set someone else up or 7 actually have any information for the division down 8 here, we are going to need more than ten days. That 9 seems like an awful short time to put anything together 10 and get it down here. My only comment. 11 MS. BRACKETT: What would you suggest, 12 rather than ten? 13 MR. HUTCHINGS: 20, 25, something that -- 14 that would give those people time to get together and 15 figure out what they are going to do, get on with it. 16 But ten seems like an awful short time for that to get 17 put together. Thank you. 18 MS. BRACKETT: Thank you. Stephen 19 Fenogino. 20 MR. FENOGINO: Madam Chair, for the 21 record, Stephen Fenogino. I don't have any comments on 22 this portion. I wanted to comment on unit accounting, 23 other than to observe that to the extent that the 24 bonding requirement is raised, it will be less and less 25 likely that anyone will actually become a unit manager. 0036 1 And that is a concern that we have talked with formally 2 and informally with staff. Thank you. 3 MS. BRACKETT: Okay. I don't have any 4 other people who would like to comment on that. They 5 have not signed for that. Come on down, Don. 6 MR. BISHOP: Nice try, Virginia. 7 MS. BRACKETT: Well, I really don't see 8 your -- 9 MR. BISHOP: I am sorry, I thought -- I am 10 Don Bishop, commercial lessor, Dallas, Texas. I am a 11 proud member of AMVETS and a proud member of the 12 Redmen's organization. I will be brief, as usual. 13 Steve Bresnen just asked one question that I had. And I 14 wonder if the commission has any figures for whatever 15 periods on how much money has actually been lost through 16 people not paying their taxes, and if we can either 17 request on there, however we do it, feed them the 18 information, or whatever? Do you know, Billy, if 19 you-all have those? 20 MR. ATKINS: Sure, we do. And you can 21 request it. I can tell you that since '94, it has been 22 about $3 million in prize fee penalty and interest. 23 MR. BISHOP: Okay. Can I presume that the 24 large portion of that is the penalty and interest? 25 MR. ATKINS: I believe so. 0037 1 MR. BISHOP: Okay. The second question I 2 had, and this is probably to the lady that came up with 3 the figures, if -- just doing some quick figuring, if I 4 understood it right, if we have a commercial hall with 5 five charities doing pretty good at 5,000 a month, would 6 be 15,000 a quarter, would be $75,000 total. And if my 7 understanding is right, the bonds cost in the 8 neighborhood of 20 to 25 percent of the amount of the 9 bond. So we are talking about a unit manager just to 10 use -- start with some sort of figure of 15 to $17,000, 11 cash, out of pocket, which certainly the unit manager is 12 not going to pay. The charities are going to pay it. 13 And the charities don't have any money. 14 The other question I have is the 15 charities, when they apply for their license, they 16 individually post a bond for the prize fees, so how does 17 that work into the unit manager's bond which would, I 18 guess, follow the individual charity bonds? 19 MR. ATKINS: While Terry is coming up, let 20 me -- let me correct something. Let me correct 21 something, Don. The amount is split pretty evenly. It 22 is about a million-and-a-half in liabilities and about 23 one-and-a-half in prize fees -- or in interest and 24 penalties. 25 MR. BISHOP: And that was since what year, 0038 1 Billy? 2 MR. ATKINS: '94. 3 MR. BISHOP: '94. That's about how much 4 we lost in bingo, by the way. Sorry, Terry. Go. 5 MS. SHANKLE: That's all right. You are 6 hitting me cold this morning. I believe under just the 7 unit manager and the organizations that go with that 8 unit manager, that the organizations would not be 9 required to post a bond, only the unit manager, because 10 the unit manager is liable for not only the inventory 11 but the prize fees and the reporting of it. Under a 12 designated agent, however, when you have a person that 13 is in charge but does not have to post a bond, the 14 organizations will still continue to have a bond at that 15 time. So unit manager, organizations not designated 16 agent, yes. 17 MR. BISHOP: So do I understand that if 18 the five charity organizations decide to go with a unit 19 manager, then they would no longer be responsible at any 20 point for any of the prize fees? 21 MS. SHANKLE: That is my understanding of 22 that. 23 MR. BISHOP: Okay. Obviously, that is 24 going to need some clarification. And thank you very 25 much, Terry. And in closing, I just want to say I 0039 1 totally agree with what Larry in his comments awhile ago 2 about this unit manager was conceived by the industry to 3 simplify things and to cut expenses. This is, 4 constructed this way, going to do neither of those. 5 Thank you. Am I supposed to ask if y'all are going to 6 ask me or not? 7 MS. BRACKETT: Yes, you may ask if any of 8 us want to ask you anything. Anyone have any questions? 9 MR. WHITTINGTON: So basically, Don, when 10 you talk about the bond supported by the charities, you 11 are basically making a suggestion maybe should look at 12 the bonds by the charity and coincided with the unit 13 manager and try to come up with some type of solution? 14 MR. BISHOP: Well, I am just saying it is 15 something that needs to be addressed and dealt with 16 because it is not addressed here. It is sort of left 17 open. Thanks. 18 MS. BRACKETT: Thank you, Don. Now, the 19 action requested of us today is that we recommend to the 20 lottery commission that this proposed new administrative 21 rule be published in the Texas Registry for formal 22 comment; is that correct? 23 MR. MINER: That's correct. And we will 24 take the points of discussion under review and we will 25 address those, and we would like to still go forward. 0040 1 MS. BRACKETT: Okay. Did you have further 2 comment regarding this? 3 MR. MINER: Well, I didn't answer 4 Darleen's question regarding the fee. 5 MS. BRACKETT: Okay. 6 MR. MINER: And that I believe accompanies 7 a fiscal note, and we have some got source documents 8 from security when they do a background investigation. 9 And they estimated up to $2500 for individual license 10 like a distributor. So basically taking out of the act 11 the cost for distributor, that was a starting point. So 12 that will be looked at as well. 13 MS. BRACKETT: Okay. Anyone have any 14 questions regarding this? Are you ready to take action? 15 Now, we really need to move on this so that you can 16 continue; correct? 17 MR. MINER: I do, because this drives the 18 application forms and the licensing process, which 19 organization, if they choose to go this way, would be 20 available to them so that they could set their books to 21 accomplish this. 22 MS. BRACKETT: All right. Is there a 23 motion and a second that -- well, what the action 24 requested is that the license issue subcommittee request 25 that the Bingo Advisory Committee recommend to the Texas 0041 1 Lottery Commission that the proposed new administrative 2 Rule 402 unit manager be published in the Texas Registry 3 for public comment. Would someone please make a motion? 4 MS. GREENFIELD: I will motion that with 5 the changes that were mentioned today with comments. 6 MR. MANIO: I second the motion. 7 MS. BRACKETT: With the consideration of 8 the comments made today. All those in favor, please say 9 aye. 10 (All in favor.) 11 MS. BRACKETT: Any opposed? Then it does 12 carry. You can proceed. So thank you. All right. We 13 are still on item 4, but we will be considering unit 14 accounting rule making. 15 MR. SANDERSON: Madam Chair, members, for 16 the record, I am Phillip Sanderson, assistant bingo 17 director. In your notebook and I believe also that was 18 put out on the table for the general public in 19 attendance today are what we consider points of 20 discussion for unit accounting. Earlier, Penny Wilkov 21 laid out some of the meetings that have been taking 22 place on unit accounting. We have met with various 23 members of the industry, the IRS. What you have in your 24 notebook today is a list of what -- some ideas that 25 we're looking at for unit accounting. 0042 1 We have had some requests from individuals 2 wanting to form units already. The majority of the 3 questions that they have asked have been generally 4 related to IRS guidelines about payroll taxes, about 5 their exempt status, forming partnerships, forming trust 6 agreements, and we're not capable of answering any 7 questions concerning IRS regulations. Plus, it is not 8 our place to determine IRS regulations and to interpret 9 IRS regulations. We are moving -- I don't want to say 10 we are moving very slow in getting unit accounting 11 started, but I think we're looking at it very carefully. 12 Those of you who have been in the industry for a period 13 of time, and I wasn't around when it started, but when 14 they authorized instant bingo sales or instant bingo 15 tickets in Texas, organizations started selling the 16 instant tickets. 17 Well, in the early '90s or late '80s, the 18 IRS said that you owe tax on those tickets. And I do 19 remember in '93 and '94 several organizations coming to 20 either the TABC at the time, or the lottery, depending 21 on what year it was, wanting to know how we can allow 22 them to get into something where they ended up owing 30 23 or 40 or $50,000 in back taxes. Well, we are looking at 24 this rule with that in mind. We have been told by the 25 IRS agents in some cases that forming a trust agreement 0043 1 between organizations that are 501(C) exempt could 2 violate their exempt status and cause it to be removed. 3 They could lose their exemption. You have got 4 organizations that are, based on their designation, are 5 not required to have payroll taxes. So if they form a 6 unit with organizations that are required to have 7 payroll taxes, how does that affect their exempt status? 8 There are several areas that we have looked at, and one 9 thing, like I said, we want to make sure we do is we 10 don't publish a rule and set out guidelines for this 11 formation of the unit. Organizations take those 12 guidelines and then end up losing their exempt status 13 with the IRS. 14 And so basically what you have before you 15 today is just general information that we're looking at 16 putting in a rule. We're still trying to make 17 determinations and get with the IRS. I believe 18 Mr. Fenogino has some groups that have submitted a 19 private letter ruling for some additional information. 20 And for the time being, that's where we stand. We are 21 going to move as quickly as we can, but we want to move 22 cautiously. And with that, I will answer any questions 23 that the committee has. 24 MR. ATKINS: I don't think, to kind of -- 25 if I can dovetail on what Phil is saying, you know, 0044 1 there is nothing -- as far as we are concerned, we are 2 able to, you know, to accept units, I mean, groups or, 3 you know, they can form their units, if they want. But 4 we have in our conversations -- as a matter of fact, I 5 had a conversation as late as yesterday afternoon with 6 Mr. Fenogino, there are right now just some outstanding 7 issues at the federal level, not at our level, but at 8 this federal levels that could have some really dire 9 unintended consequences against organizations. So that 10 is the majority of what I think is trying to be flushed 11 out. And Steve -- Steve did, he told me the same thing, 12 that he had been working with some groups that are 13 trying to get some information from the IRS on these 14 potential impacts. 15 MR. WHITTINGTON: One last question. If 16 you have got basically a charity of 501(Cs), if they 17 form a unit, the only difference I see is based they 18 would be getting the same amount of donations, 19 everything should be set up the same way for them to 20 have the same discretion at the end of the year to file 21 taxes with their own self instead of the unit, just like 22 we do now. I mean, how is that going to differ that 23 much by having a unit and having them getting the same 24 amount of donations, possession or whatever, and they 25 can keep the same status they with the IRS and file the 0045 1 same way? 2 MR. SANDERSON: Well, and -- number one, 3 they will still be required to file with the IRS. 4 MR. WHITTINGTON: Yes. 5 MR. SANDERSON: Even if they form the 6 unit, each organization will still have to file their 7 990. 8 MR. WHITTINGTON: Right. 9 MR. SANDERSON: So the determination of 10 how much they report on their 990 is the IRS, to some 11 extent, has said that if we put in a rule that -- say 12 that based on these guidelines here, that the money all 13 goes into one account, and then the unit manager or the 14 designated agent comes back and divides -- say there are 15 five units, they divide it by five and everybody reports 16 one-fifth on their 990s, the IRS says, that is fine, you 17 know, if they split it all equally. But you get into 18 who is responsible for payroll taxes, you know, like I 19 said, not all bingo halls are made up of the same 501(C) 20 types. 21 MR. WHITTINGTON: Okay. There are some. 22 MR. SANDERSON: So there are some -- you 23 know, are some areas that, you know, depending on how 24 the unit is actually formed and created, that it could 25 have some -- some federal implications. 0046 1 MR. WHITTINGTON: I can see that. 2 MR. SANDERSON: And as Billy said, there 3 is not anything right now that really -- you know, we 4 can accept a unit at this point. And what we are trying 5 to flush out in the rule is really more recordkeeping, 6 to let them know what records they need to keep both for 7 us, and you know, that would -- that the IRS would still 8 require in their recordkeeping requirements. 9 MR. WHITTINGTON: On that same note, those 10 other organizations that is not a 501(C) that might have 11 to pay payroll taxes? 12 MR. SANDERSON: Okay. First off, most all 13 organizations are 501(C) that play bingo. 14 MR. WHITTINGTON: Okay. 15 MR. SANDERSON: The difference is the C 16 designation, whether it is a 3, 4, 10, 8 or 19. There 17 are religious organizations, I believe, do not have to 18 pay payroll taxes. 19 MR. WHITTINGTON: Okay. If they do, are 20 they paying payroll taxes now? Would they be paying 21 them right now? 22 MR. SANDERSON: My understanding is the 23 501(C)(3) religion does not pay payroll taxes. 24 MR. WHITTINGTON: Okay. I mean, you said 25 federal and income tax, it might be completely different 0047 1 when they get -- come up for tax time, but would they be 2 doing that right now, exactly what they are going to be 3 doing with the unit? Wouldn't they have to pay the 4 taxes anyway the same way? 5 MR. SANDERSON: For the most part, yes. 6 MR. WHITTINGTON: That is what I am 7 saying. So it would not be anything different. What I 8 see in a unit is people coming together, getting the 9 same disbursement but doing their own taxes at the end 10 of the year, just like they are doing it right now. I 11 mean, and making sure that unit manager know exactly how 12 much money they have got allocated so they can pay taxes 13 on them? 14 MR. SANDERSON: That is correct. 15 MR. WHITTINGTON: So I think it would be 16 pretty simplified for us to write some type of -- some 17 type of rule. 18 MR. SANDERSON: And that's what these 19 guidelines are, for the most part. And I guess if you 20 have any comments on what is on these two pages, there 21 again, I think the majority of what we have laid out is 22 more recordkeeping, reporting type information that 23 would both help the organizations that are in the unit 24 make sure that they get the information that they need 25 to file their 990s. 0048 1 MR. WHITTINGTON: Right. 2 MR. SANDERSON: And how the information is 3 reported to us and how the -- you know, the prize fees 4 are paid. 5 MR. WHITTINGTON: Basically, just 6 simplifying everything so people can understand. And it 7 is not going to be -- I know it is going to be difficult 8 getting it altogether, but in the long run, it is going 9 to be pretty easy for them to understand. Basically, 10 you are almost doing the same thing. And just report it 11 the same way and make sure that your unit manager or 12 unit bookkeeper give you the proper amount of proceeds 13 that you have at the end of the year so you can pay 14 taxes on them, pay the tax. 15 MR. SANDERSON: Yes. 16 MS. GREENFIELD: I have a question about 17 the unit's net proceeds. 18 MR. SANDERSON: Yes, ma'am. 19 MS. GREENFIELD: We had talked last time 20 about a lessor being part of the unit, and if we were 21 going to keep the income separate. And I see you have 22 got gross receipts plus rent income. How is that going 23 in y'all's discussions? 24 MR. SANDERSON: It is the -- well, if you 25 are -- you are talking about the lessor that is also a 0049 1 conductor? 2 MS. GREENFIELD: Right, the 3 conductor/lessor. 4 MR. SANDERSON: And that, number one, you 5 know, by definition, all the proceeds have to go for the 6 charitable activity after expenses. And it includes 7 rent from those organizations that collect rent. There 8 is -- the depositing of the rent into the unit account 9 just allows for the organizations to continue sharing 10 that net revenue. Now, if -- I believe in this draft 11 that we have, the member organizations are still under 12 the requirement to keep their bingo account. One avenue 13 that we could look at would be if that organization is 14 the conductor/lessor and they are charging rent to the 15 unit members, that, you know, they could put that in 16 their separate bingo account. 17 Now, the problem runs in if the whole idea 18 is to share in the expenses of operating that hall, then 19 that conductor/lessor, where would they pay the rent to 20 the top chair lessor out of? Would it be out of their 21 bingo account or out of the unit account, and depending 22 on whether or not there are other utilities or other 23 expenses that are paid? So that's why we were leaning 24 towards putting it all in the unit account and letting 25 all the expenses associated with that location being, 0050 1 you know, authorized expenses being disbursed out of 2 that account. 3 MS. GREENFIELD: Okay. And but you also 4 have down here that they still have to file their 5 quarterly report and remit the tax? 6 MR. SANDERSON: If it's the unit that is 7 made up with a designated agent, the statute says that 8 they are required to file the reports. 9 MS. GREENFIELD: Okay. 10 MR. SANDERSON: And if it is a unit that 11 is made up of the unit manager, then the unit manager 12 files a report for the unit. 13 MS. GREENFIELD: Can we have a rule that 14 has two versions, where we have got a commercial lessor 15 who opts in to have his rent income as part of the unit 16 and also a lessor that can also opt out to have the rent 17 income, is there any way we can put those in there? 18 MR. SANDERSON: If you want more rules, I 19 guess we can. But it would probably lead to more 20 confusion. I think we ought to just try to do one way 21 or the other. 22 MS. BRACKETT: Go ahead, Larry. 23 MR. WHITTINGTON: I just feel that I can 24 see a main account for the unit account, but I think 25 these organizations need to keep the account they have 0051 1 got now. And that would simplify it so much to just 2 have all put in their account for this main account. 3 MR. SANDERSON: Well, the purpose -- the 4 initial purpose of unit accounting was to share in the 5 revenue. 6 MR. WHITTINGTON: Right, exactly. 7 MR. SANDERSON: And also with House Bill 8 2519 where the use of proceeds now has to be consistent 9 with their exempt status from the IRS. If organizations 10 of different type of exempt status are together in the 11 unit, then if their exempt status is religious, then 12 that's how they are to use their money is for religious 13 activities. So they can't go out and sponsor a Veterans 14 Day parade, for example, out of that unit account. So 15 that's where we came back in. And this would keep the 16 proceeds or the net revenue still with the 17 organizations. The unit account is just basically a 18 holding account to make -- 19 MR. WHITTINGTON: Exactly. 20 MR. SANDERSON: -- you know, to simply the 21 payroll, you pay one check to each individual. You pay 22 one check for the utilities or the rent, or whatever 23 other authorized bingo expenses there are. 24 MR. WHITTINGTON: So the best thing to do 25 is just go out and get the same type of organization. 0052 1 MR. SANDERSON: That would be an easier 2 way. I mean, that would be one way to do it. But still 3 I think that the organizations who would still have 4 their, so to speak, control over how they disburse their 5 proceeds from their bingo account. And the unit then 6 would just say, at the end of the quarter, we have got 7 $10,000 to split between the five of you-all, so 8 everybody gets $2,000, and then they use it how they 9 need to use it for the charitable organization. 10 MS. BRACKETT: Thank you. Stephen 11 Fenogino. 12 MR. FENOGINO: Good morning. For the 13 record, my name is Stephen Fenogino. In answer to the 14 question that Ms. Greenfield raised, and I think it is a 15 valid question, I don't think -- and the question was, 16 well, if a conductor who is a lessor wants to include, 17 as I understood your question, only the revenues from 18 the conducting of bingo in the unit, why can't the 19 conductor, if the conductor so chooses, not to include 20 in a unit the revenues from leasing? And I don't think 21 the statute directs one way or the other the solution 22 for that. And it was my intent in helping draft it that 23 that would be dependent upon what the unit agreement 24 says. 25 So in the simplest analysis, let's assume 0053 1 there are three charities conducting at hall A, and 2 charity one is the lessor and a conductor, and charities 3 two and three are only conductors. Charity one could 4 decide to join the unit, but only include its bingo 5 conducting revenue, not its leasing revenue in the unit 6 agreement. And I think the statute is abundantly clear 7 that charity one has that option. That being said, then 8 the statute would control the use of those proceeds -- I 9 am sorry, strike that, the use of those revenues that 10 have to be accounted as a unit. But as a part of, for 11 example, Section 20001.431, subparagraph 3, unit 12 accounting agreement is defined as the written 13 agreement. And then subparagraph B, the method by which 14 the net proceeds of the bingo operations of the unit 15 will be apportioned. 16 Well, again, charity one in this 17 hypothetical has chosen as a part of its written 18 document with the other two charities not to include the 19 leasing revenues as a part of the bingo operations of 20 the unit. Charity one still has to treat the leasing 21 revenues appropriated under the Bingo Enabling Act and 22 applicable rules, but as a part of the unit agreement, 23 those revenues are not included. And I think it really 24 would be very simple for the rule to distinguish, 25 example one, where this charity chooses to include its 0054 1 revenues from leasing as a part of the unit, and example 2 two, where the charity chooses not to include. 3 And that would be subject to just the 4 negotiations between the charities. I don't think the 5 commission should be in the position of dictating what 6 is in the best interest of a particular charity or group 7 of charities. So I take a little bit of a perhaps 8 different view than Mr. Sanderson. I understand from 9 administrative efficiency that perhaps it is simpler if 10 you treat everyone the same, but that is assuming 11 everyone has the same set of facts and circumstances. 12 And we know that that is not the case. So I think we're 13 still in -- these are bullet point discussions, not a 14 draft rule, but I think it is very easy to craft that. 15 If I may, I would like to address a couple 16 of other points, and from the big picture, though, the 17 unit accounting there have been we have had several 18 discussions, formal and informal, with our subcommittee 19 and otherwise trying to get a handle on how this will 20 work. And from my perspective, what we have with the 21 existing legislation and the commission's understanding 22 of that, I think it is very simple to implement unit 23 accounting from the state law perspective. 24 The problem is, and this was something we 25 have discussed repeatedly, this law of unintended 0055 1 consequences. And we have identified from our side of 2 the aisle, being the regulated entity, and the staff 3 from being the regulators, there are some serious 4 challenges if you implement unit accounting, and under 5 the law of unintended consequences. And they are from 6 the IRS statutes and rules. And let me just give you 7 the best example. Ten years ago, none of us sitting 8 here today would have ever imagined that UBID would be 9 an issue for pull tab revenues. And everyone was 10 surprised in the industry. I believe everyone, perhaps 11 maybe there was someone who was a tax whiz who 12 understood the Internal Revenue Code, and specifically 13 26 USC Section 513(F), which defines revenues of bingo. 14 But the IRS decided in about 1996 that pull tab wasn't 15 bingo, and it was subject to UBID. And it caused huge 16 tax liabilities for charities. No one at the lottery 17 commission had an idea that that was coming down the 18 track, at least the people that I spoke to, which was 19 Billy and Phil, and I guess Mark was there at the time. 20 Certainly from the lawyers, no one had any 21 idea. And there were several cases that were litigated, 22 and the cases did not come out well for the industry. 23 And in the case of the Arc, I think the Arc of the 24 Capitol area, some of you-all have heard me tell you 25 about that one, I think our tax liability over a three- 0056 1 or four-year audit period was around 8 or $9,000. And 2 that was a hard pill to swallow. 3 Well, again, no one thought that far into 4 the tax code and how it would affect bingo. Now, we 5 have unit accounting. And I don't want to get in the 6 position, Larry, that I would advise clients -- and I 7 have already drafted a trust agreement for a group of 8 clients. I have advised that they obtain a private 9 letter ruling from the IRS. I thought they were going 10 to do so. As of yesterday evening, they had not. What 11 I don't want to have happen is, you know, here is what 12 the state law allows and requires, and whether we have a 13 rule or not, you can implement it. You have got to have 14 a written agreement. You have got to file it with the 15 staff. We don't have a rule yet so we don't have to 16 worry about whatever bookkeeping or regulatory 17 requirements they want or don't want. It would be nice 18 to know, but we don't have to worry about that. We are 19 in compliance with the law. 20 Three or four years from now, this group 21 of charities, one or more of whom get audited by the 22 IRS, and the IRS says, you know, we don't understand 23 this unit accounting. It is not provided for anywhere 24 in the tax code. And it is not. And we think that 25 there has been illegal bingo because the unit is the one 0057 1 that is conducting. Well, yeah, but those charities are 2 still licensed. Well, we understand that. But in 3 effect, this manager is the one that is really 4 conducting the bingo or the unit. 5 And if we have got a trust agreement, for 6 example, as a hypothetical, we are going to disallow all 7 of your tax exempts because y'all have been conducting 8 business or the entire bingo is subject to UBID. Oops. 9 And the best case scenario of that, if that were to 10 happen, is we litigate that. I get paid to litigate. 11 Y'all were wondering from my perspective where the 12 silver lining is, well, I get paid. It might cost 50 or 13 $100,000 to litigate. And after three or four years, 14 you might win. And you know, while we dodged the 15 bullet, but those five or six charities sure didn't 16 because they have got a huge legal bill. 17 All of that to say that I thought one of 18 the solutions was to get a private letter ruling. And I 19 had thought my clients had retained a CPA. They are out 20 of town. And the CPA has not moved as quickly as anyone 21 has. But from the commission's perspective, and again, 22 this is a lack of communication, and I will take some 23 hit for that, I had understood or I had thought that 24 they were going to formalize some of the concerns that 25 the IRS has in the form of Mr. Jim Hendrick. And I 0058 1 spoke yesterday with Billy about it, and I think they 2 were sort of thinking that we would move first, and I 3 was thinking they were going to at least formalize some 4 of these issues. 5 And Phil has talked about one of them, 6 which is a huge issue. If you have got a 501(C)(3), a 7 (C)(A), and a (C)(6), a (C)(19), there are different tax 8 treatment under the Internal Revenue Code for those 9 revenues and expenses and proceeds. And you know, my 10 solution, at least initially, let's take a baby step, 11 let's get five charities or seven charities that are all 12 501(C)(3s), not religious organizations, and get them to 13 do the private letter ruling. And so I think by the end 14 of next week, we will have filed that on behalf of those 15 501(C)(3s). And private letter ruling costs around 16 $2600. That's the filing fee with the Internal Revenue 17 Service. It won't include the fees associated with the 18 CPA. 19 There is about 130-page form the IRS has 20 promulgated to get a private letter ruling. And so 21 there are a lot of questions they want. They want 22 everything briefed. So it won't be an inexpensive 23 process to do. But I think -- and then to finish and I 24 will -- Larry, I know you have a question, it usually 25 takes the IRS 60 days normally to issue a private letter 0059 1 ruling. Under IRS law, that private letter ruling is 2 only -- can only be used by the charities who are 3 subjected to the ruling, meaning the charities that have 4 asked for it. But if the IRS said, well, if you do A 5 through F, and if you do A through F, it is our opinion 6 that this would not affect your tax exempt status, 7 provided you do items 1 through 27, or whatever it would 8 be, then those five charities are bulletproof, if they 9 do those sorts of things. And other charities could 10 then look at that, and if they did -- had the same set 11 of facts and circumstances, then they could use that 12 private letter ruling. It is not binding on the IRS 13 against them, but the IRS looks really stupid if they 14 say, well, charity A through F did it under these facts 15 and circumstances, and you said it was okay, now these 16 other charities did it the same way, what's the problem? 17 So that's -- that's where I think from the industry 18 perspective we are now. Yes, Larry. 19 MR. WHITTINGTON: You said it cost like 20 $2600 to do that? 21 MR. FENOGINO: The filling fee alone, 22 that's -- that you pay the U.S. government that fee. 23 MR. WHITTINGTON: So who is paying it, the 24 attorney, you? 25 MR. FENOGINO: No. The charities. The 0060 1 charities would be paying that. 2 MR. WHITTINGTON: I know that. 3 MR. FENOGINO: And then, obviously, there 4 is a lot of effort that has to go into drafting because 5 the IRS wants, in effect, a brief on the issues. And if 6 you don't provide the brief, you either, A, they will 7 reject it and say, submit the legal authorization and 8 citations, and we don't understand your set of facts, so 9 go back and do it again; or B, you will get held up in 10 la-la land for six months to two years. Neither 11 circumstance is particularly attractive to 12 a charitable -- or a group of charitable organizations 13 at that point. 14 And again, from my perspective, I thought 15 the staff was going to more formalize -- I mean, the IRS 16 can't give them written legal advice, I don't think, 17 other than through a private letter ruling. But it was 18 my understanding that y'all were going to have some 19 written communications with the IRS. And if -- if I am 20 misunderstood, I would like to be, and maybe not today, 21 but soon, clarify -- some of those issues clarified 22 because they are very difficult issues. They could put 23 into danger the tax exempt status of charities, which no 24 one wants to have happen. 25 MR. PAVLOVSKY: Stephen. 0061 1 MR. FENOGINO: Yes. 2 MR. PAVLOVSKY: Define UBID. 3 MR. FENOGINO: I'm sorry. Unrelated 4 Business Income Tax. Basically, it is the issue of -- 5 you know, I have some other observations about some of 6 the talking points, if I may, if we are ready to move 7 on, Madam Chair. 8 MS. BRACKETT: I would like -- we had 9 several people sign up to talk about this item, but I 10 think most of them have done it at least once. Darleen, 11 did you have anything else to add? 12 MS. MASHBURN: Not at this time. 13 MS. BRACKETT: Okay. And Don Bishop, 14 where is he? Don, did you have anything to add on this? 15 MR. BISHOP: Are we on the accounting rule 16 making? 17 MS. BRACKETT: The rule making, yes. 18 MR. BISHOP: Yes, ma'am, please. 19 MS. BRACKETT: All right. You are on. 20 MR. FENOGINO: I would like to come back 21 when I can, Madam Chair. 22 MS. BRACKETT: All right. Thank you. 23 MR. BISHOP: Don Bishop, Dallas, Texas. I 24 have a -- 25 MR. SANDERSON: There is no quorum. 0062 1 MR. BISHOP: No quorum. 2 MS. BRACKETT: No quorum. Okay. Yeah, we 3 can talk about it, we just can't take action; right? 4 MR. BISHOP: I just want to make a 5 comment, and I sort of alluded to it awhile ago, and 6 someone awhile ago sitting real close to me made the 7 comment that the primary purpose of the unit accounting 8 was to share revenue. I was involved in the conception 9 of the unit accounting, and our primary purpose was to 10 streamline the interworking of bingo and to save the 11 charities money. So I would like to get that in the 12 record, that that was our primary purpose. Sharing 13 revenue was a side effect, to keep us from having to 14 juggle the charities' playing times all the time. 15 I don't know if I am in line or not, but I 16 would like to address the unit manager vote that just 17 took place. And I was real surprised with all the 18 questions that were still open that the committee would 19 vote to publish the -- I guess the proposed rule with 20 all those questions open. And I think that when we have 21 that many questions open, that I think we should 22 continue it and not publish it until we get the answers 23 to those questions, because what I have observed is once 24 something gets published, it is pretty much a done deal, 25 even with the additional public comment. 0063 1 MR. WHITTINGTON: No. We are going to 2 move forward. And it is not going to be published until 3 we get it right. We are going to try our best to get it 4 right, but we have got to move forward to get it right. 5 MR. BISHOP: But if I understood it, you 6 just voted, Larry, to go ahead and publish it for public 7 comment? 8 MR. WHITTINGTON: With the comments that 9 we are going to add onto it. 10 MR. BISHOP: Right. My comment is and my 11 observation is, once it gets published in whatever form 12 it gets published, that's usually the done deal. It 13 becomes the rule. That's just my observation. 14 MR. WHITTINGTON: Yes. 15 MR. BISHOP: Thank you. 16 MS. BRACKETT: Thank you, Don. Charles 17 Hutchings, did you have anything else to -- 18 MR. HUTCHINGS: Charles Hutchings, AMVETS, 19 Dallas. Most of it has been covered, the rental income. 20 Under units, net proceeds has been discussed. The 21 purpose of both the unit and the charities filing a 22 quarterly report has been discussed. The only question 23 I really have left, I believe, is the amount and source 24 of each authorized license organization will initially 25 contribute to the unit. When this unit -- if someone 0064 1 sets up a unit, and they are going to set up with a 2 unit -- the unit accounting and a unit manager, are we 3 saying here that -- what you are asking -- or what I am 4 asking, is each unit going to have to divide that 5 evenly, or would it be possible for unit one, charity 6 one to put in X number of dollars, charity two, X 7 numbers of dollars, or what are we looking at in that 8 situation? 9 MR. SANDERSON: In answer to your 10 question, this is something that we're recommending to 11 be included in the unit accounting agreement. And what 12 it does is it initially sets up that unit bank account. 13 MR. HUTCHINGS: Right. 14 MR. SANDERSON: And there is one thing, 15 and it could be -- it doesn't matter, you could do it 16 that way. It the agreement says, organization one puts 17 in 5,000, and the other organizations don't put 18 anything, or they each put in a thousand. And then the 19 same thing could be covered in the way the unit is 20 dissolved, is that that organization one will get their 21 5,000 back when the unit is dissolved. 22 MR. HUTCHINGS: So it's not a deal where 23 we are going to try to make each organization put in 24 exactly the same or anything? 25 MR. SANDERSON: No. No. And that is why 0065 1 we left it as that, it just identifies how much each 2 organization will contribute to forming that unit 3 account. 4 MR. HUTCHINGS: I believe that is the only 5 extra thing. I do want to say that, you know, I think 6 there has been some good questions on this, and that I 7 agree with those questions. Thank you. 8 MS. BRACKETT: Okay. Thank you. Steve 9 Bresnen, did you? 10 MR. BRESNEN: Yes, ma'am. Steve Bresnen 11 on behalf of the bingo interest group. It seemed like 12 when we started this rule making process, I didn't need 13 reading glasses. 14 MR. SANDERSON: Me either. 15 MR. BRESNEN: I just have a couple of 16 questions. I understand from the discussion earlier 17 between Mr. Whittington and Mr. Sanderson that there 18 might be some utility, and some of the organizations may 19 want to maintain their own -- their separate bingo 20 accounts. I think this rule authorized but not required 21 that. One of the reasons -- one of the purposes, and it 22 is in the testimony before the legislature and the 23 materials that were passed out by the sponsors, that one 24 of the purposes of this was to reduce the number of 25 accounts that needed to be audited out there. 0066 1 There may -- I didn't realize at the time, 2 there may be some organizations that would want to keep 3 a bingo account open for one reason or another. And I 4 don't suppose we ought to -- we ought to necessarily 5 prohibit that if there are some people that want to do 6 it. But I see no reason to require them to do it. And 7 in that regard, it looks to me like we have got 8 additional reporting going on or duplicate reporting 9 going on under the 1, 2, 3, 4, the 5th paragraph where 10 we are expecting both the unit manager, the unit 11 basically files the same report that each of the members 12 of the unit file. And where it seems -- looks to me 13 like we are duplicating, if -- maybe if they have to -- 14 if they are going to maintain separate bingo accounts, 15 maybe it is appropriate for them to file duplicate or 16 separate quarterly reports for each of those accounts. 17 But if they are not going to, then it wouldn't make 18 sense to me for both organizations or both levels to 19 file. Otherwise, you know, we are just getting further 20 and further and further away from those purposes that we 21 sought to achieve by doing this. 22 And I would point out that the discussion 23 points, the last paragraph with the cross reference to 24 the statute, had the same problem in determining the 25 amount of the bond as we had with the -- as we had with 0067 1 the previous discussion on the unit manager portion of 2 the rule. I would subscribe to Mr. Fenogino's earlier 3 comments as well and Mr. Hutchings or the question 4 answered there as well. Thank you. 5 MS. BRACKETT: Thank you. That's all the 6 public comment of the people who have signed. Oh, 7 Steve, I am sorry, I didn't see you come back in. 8 MR. FENOGINO: Yes, ma'am, Chairman. For 9 the record, Stephen Fenogino. I echo Mr. Bresnen's last 10 comment about it ought to be flexible enough that if an 11 organization wants to distribute into its general fund 12 from the unit, it ought to be able to do so. 13 Consequently, there will be other organizations that 14 will want to take net proceeds from the unit into their 15 bingo account, and then from their bingo account either 16 to distribute directly from that or distribute into the 17 general fund. And I think the more mature halls with 18 larger charities, that's the practice today, is they 19 have a bingo account. When they make a distribution, 20 they distribute it to their general fund, and then they 21 use those bingo proceeds appropriately from their 22 general fund. And that's the first point of the points 23 of discussion. 24 Jumping down to the next lengthy point of 25 discussion that starts, the unit manager, etcetera. My 0068 1 observation is that -- obviously, someone has to submit 2 under oath quarterly commission on a form prescribed by 3 the commission and report of the unit. That is okay. 4 But the next sentence says, members of the unit shall 5 also submit under oath quarterly to the commission on a 6 form prescribed by the commission a report in compliance 7 with 505. My observation on that is if you have a unit 8 manager, the charity may not be able to swear under oath 9 much of anything. If they delegated everything to the 10 unit manager, if you think about it for just a moment, 11 how can the charity, the president or executive director 12 of a charity, who has delegated all this responsibility 13 to a unit manager, they can swear it, but it is 14 meaningless because they weren't there. They don't know 15 what the inventory is. They don't know what the 16 employees have been paid, etcetera. And it would seem 17 to me that you are setting up -- I don't think 18 intentionally, but you are setting up charities to lie 19 under oath. Because they can't, they weren't there. 20 And you know, I don't know that we have to 21 have a solution to that issue today. I know there is a 22 requirement in the statute that oaths be -- that reports 23 be filed under oath. I just don't know that a 24 conducting organization that has, particularly if they 25 have a unit manager, would know under oath to be able 0069 1 to. And if you were cross-examining that person under 2 oath, how in the world do you know this? Well, I know 3 it because our unit manager. That is not perhaps what 4 the oath says. 5 MR. SANDERSON: This section is -- ties to 6 the first paragraph where it talks about the separate 7 bank accounts primarily reporting the activities of the 8 bank accounts themselves. In the case of the unit 9 account, the report would have all the information as 10 far as the sales, the prizes, the expenses, you know, 11 rent, lease payments to distributors, cost to 12 consultants, so forth. And then out of there, there 13 would be a line item that would show how much the unit 14 disbursed to the organizations that they put in their 15 bingo account. The organization's report under this 16 section here would be how they use that money out of the 17 bingo account. So it would not be under oath as to the 18 expenses of the unit. It would just be under oath as to 19 how they use the money out of their account. 20 MR. FENOGINO: And that makes sense. And 21 then the other thing I always am interested in, if there 22 are obviously, I am assuming the staff are tweaking the 23 form, there is the existing quarterly report form, and I 24 guess from my client's perspective, they would like to 25 see the form before it is finalized so that it can be as 0070 1 user friendly as possible. And I know the commission 2 staff has suggested different computerized reports that 3 the charities keep, and they are on your website, for 4 example. And I am hoping you-all are looking at that 5 from the standpoint of being able to seemlessly take 6 documents from -- or numbers from one report and throw 7 them into this quarterly report. And I see Phil shaking 8 his head yes. 9 MR. SANDERSON: Yes. 10 MR. FENOGINO: Thank you, Madam Chair. 11 MS. BRACKETT: All right. So this is not 12 an action item. And we have discussed it. And Phil, do 13 you think you have enough to work with? 14 MR. SANDERSON: I believe so. I think 15 primarily we just wanted to make the BAC aware of where 16 we were, that we are working on this. We have received 17 calls from organizations wanting to know the status of 18 forming a unit. As Billy Atkins said, you know, you can 19 form the unit, but you have got to be very careful at 20 this point in time how you run the activities, because 21 there could be some unintended consequences with the 22 IRS. We are working on getting forms developed, and you 23 know, we will put those out to let the people comment on 24 those also. But we are moving forward. 25 And these and -- and as far as, you know, 0071 1 the comments we received today, and the overall opinion 2 of the Bingo Advisory Committee is this is the direction 3 that we would like to move forward in. And you know, we 4 will still work with Mr. Fenogino and Mr. Bresnen and 5 the industry. Marilyn Matthews was the chair of this 6 committee. If you would like to appoint another 7 individual to be the chair of that committee, or 8 subcommittee, then we will work with that. And I don't 9 recall right offhand who the other member was, Danny 10 Moore, who is not here today also. And I have sent him 11 a copy of this several weeks ago, and I have not heard 12 back from him. So I don't know what his comments are -- 13 are on this. 14 MS. BRACKETT: Okay. 15 MR. ATKINS: Can I just say from the 16 staff's perspective, that on this we are still actively 17 seeking comment from all of the industry on these 18 issues. So you know, we are hoping that if someone 19 knows how to resolve these issues, they will bring that 20 forward. 21 MS. BRACKETT: Okay. 22 MR. SANDERSON: And we will -- you know, 23 if somebody wants to e-mail me directly with their 24 comments, you know, if they see something in here, we 25 can move forward in putting this out on the website as, 0072 1 you know, possibly as points of discussion under the 2 section that we had for draft rules so that, you know, 3 more people can look at it. 4 MS. BRACKETT: I think that is a very good 5 idea to do that. 6 MR. ATKINS: And before we did that, I 7 would just recommend that you get together with Steve 8 and make sure that we have all of those questions on 9 there. 10 MR. SANDERSON: Yes. 11 MS. BRACKETT: Anyone else have a question 12 of Phil? Okay. So let's take like a five-minute break. 13 All right. 14 (Recess.) 15 MS. BRACKETT: All right. I would like to 16 call the meeting back to order. We are on agenda item 17 number 5. And Mario Manio is the subcommittee chair. 18 MR. MANIO: Just a brief background on 19 this document on the draft for the use of net proceeds. 20 This is the third time that this document or this rule 21 draft was presented to BAC. And the version that we 22 have today is consider -- this is entirely different 23 from the first two versions. The first one was nine 24 pages long. The second one was seven pages long. They 25 were all discarded in favor of the new version. What I 0073 1 can say about this new version is the fact that the -- 2 this position of net proceeds are now more in line with 3 the IRS Code. And the allowable expenses for travel 4 have been explicitly presented in this new version with, 5 you know, what can be done and what cannot be allowed as 6 far as travel expenses are concerned or statement of 7 expenses. And with that brief introduction, I would 8 like to open the platform for comments, observations, 9 decisions, improvements. 10 MS. BRACKETT: I see you want staff to 11 speak to you at this point. 12 MR. SANDERSON: Phil Sanderson, assistant 13 director of bingo operations division. The rule itself 14 lays out different avenues of the use of proceeds for 15 charitable purpose. It goes more along the guidelines 16 of the IRS, as Mario said. When we do an audit, we will 17 base it on the determination of the tax exempt status of 18 the organization. We are requesting that they maintain 19 a copy of their form 1023 or 1024 that they filed with 20 the IRS to get their exempt status. If they do not have 21 those documents, then they need to make sure they keep 22 copies of their bylaws, articles of incorporation, 23 organizing instruments. 24 Paragraph A and B pretty much lay out 25 those types of records that are required. The 0074 1 recordkeeping requirements are discussed in paragraph C, 2 and it is just a matter of the organizations, make sure 3 they keep documentation of how the proceeds are 4 distributed. One requirement is that it does come out 5 of the bingo account. There were some lengthy 6 discussion on this in the subcommittees. It does not 7 prohibit the organizations from putting money into their 8 general account, but what it does is before they put it 9 in their general account, they have an itemized 10 statement of how that money is going to be used out of 11 the general account. For example, that if they pay 12 authorized use of proceed type activities out of their 13 general account, and it comes up to $4,522.09, then if 14 they have that list of those activities, it would be 15 like making an invoice out to their bingo account, and 16 the bingo account writes a check to the general account. 17 That way, the money, when it goes into the general 18 account, has been used for those purposes instead of the 19 current practice of putting the money in the general 20 account to be used for purposes. 21 And it will help cut down on the audit 22 time that we spend analyzing the general account, 23 because right now we have to make sure that the money 24 that goes into the general account has been used for an 25 authorized activity, whereas in this case, before the 0075 1 money goes into the general account, it has already been 2 used for an authorized activity. It lays out some 3 activities that will not qualify for use of proceeds, 4 those that inure to the benefit of any individual 5 member, officer or director that is other than 6 reasonable compensation, anything that is not 7 documented. All proceeds have to have some sort of 8 documentation. As Mario says, it allows for the 9 reimbursement of travel expenses for conventions and so 10 forth as long as documents are maintained and the 11 vouchers and the receipts. And with that, I will turn 12 it over to Penny Wilkov. 13 MS. WILKOV: Thank you. For the record, 14 my name is Penny Wilkov, and I'm the assistant general 15 counsel with the Texas Lottery Commission. And I am 16 just here to address the process that we went through in 17 crafting this rule. Today, we are asking you to provide 18 input, advice, and counsel on this rule, including a 19 clear identification of issues that you would like the 20 working group to continue to work on, if that is your 21 recommendation, or if not, just as is, either way, and 22 to recommend ultimately that the Texas Lottery 23 Commission publish the rule on use of net proceeds for 24 charitable purposes in the Texas Registry. And that's 25 the -- with the incorporation of your input, advice, and 0076 1 counsel, if there is any. As far as the process that 2 was involved in crafting this rule, I would point to the 3 myriad of meetings that have occurred on this subject. 4 Looking at my notes, I am showing the subcommittee met 5 to discuss a version of the rule, and it is not the one 6 that you have in front of you, but the issues are 7 similar. On July 10th, July 17th, July 24th and July 8 31st, and then a longer and more involved version of 9 this rule was brought to the Bingo Advisory Committee on 10 August 21st, where it was recommended that the rule 11 needed further discussion and review. 12 Based on this recommendation and working 13 from the transcript of the meeting, and with the 14 industry representatives, the working group went back to 15 the table to negotiate and address the areas of concern 16 raised at the meeting, and we've tried to revise the 17 proposed rule that you have before you today using 18 those -- that input negotiations, recommendation, 19 etcetera. 20 And as you can see from this version of 21 the rule that the emphasis is on the recordkeeping 22 requirements that the lottery commission would like to 23 see as far as how the charities use their net proceeds 24 for charitable purpose. Again, today, we are asking 25 that you provide input, advice, and counsel on the rule, 0077 1 including a clear direction on what you would like the 2 working group to continue to work on, if that is your 3 recommendation. Otherwise, we urge you to recommend 4 that the Texas Lottery Commission publish a rule on use 5 of net proceeds for charitable purposes in the Texas 6 registry -- register, registry of bingo workers. 7 MS. BRACKETT: Mario, do you have any 8 comment you want to make now as chair of the committee? 9 MR. MANIO: No, Virginia, I think that has 10 been established. 11 MS. BRACKETT: Okay. We will hear public 12 comment now. And I want to caution you that at one 13 o'clock we will lose the forum, and we will have to stop 14 the meeting, so bear that in mind when you make your 15 comments. And I can't believe it, but on the top of the 16 list here is old Steve Bresnen. 17 MR. SANDERSON: Let me add one comment 18 before Mr. Bresnen adds him. The original requirement 19 in here that the organization submit a form listing the 20 charitable activities each quarter when they file a 21 quarterly report. This is going to be used to assist us 22 in determining that the organizations are using the 23 money for activities that are consistent with their tax 24 exempt purpose. And it is -- in my -- most cases that I 25 have seen, when I did audits several years ago, the 0078 1 number of checks that were written for charitable 2 activities in most cases were anywhere between one and 3 two a quarter to maybe ten a quarter. So we are not 4 talking about a great big laundry list. 5 MR. BRESNEN: Steve Bresnen, on behalf of 6 the bingo interest group. Let me just talk about Phil's 7 point for just a minute. When -- when the statute had 8 four -- I think it was four items that were identified 9 as allowable uses, I think what Phil said was accurate, 10 that you would have a check that was for whatever one of 11 those purposes was, feeding the needy, or doing 12 something to alleviate hunger, but the statute now says 13 that you can expend your net proceeds in any manner that 14 is consistent with your tax exempt status. We had a 15 meeting with a fellow from the IRS who audits and 16 enforces these -- the IRS standards. And he pointed out 17 that there is a couple of ways that you can use your 18 money, a couple of general ways, one of which is for any 19 reasonable and necessary expense that is for a 20 legitimate business purpose of the organization. That 21 is paraphrasing. But I think that is fairly accurate, 22 at least in concept. 23 Now, that means that if you are writing a 24 scholarship check, you cannot only pay for the 25 scholarship, but you can pay for the 37 cent stamp to 0079 1 mail it to the recipient. So I think if we have 2 documentation down to the 37-cent level, then we are 3 overdoing it again, and we are driving up expenses. 4 That's one of my primary concerns with this rule. I 5 think that that sort of mindset is inconsistent with a 6 regime in which people can spend their money on the 7 general operating expenses of the organization, and 8 because you would have to list everything. And so that 9 would be one comment that I would have. Let me back up 10 for just a minute and say that this rule has undergone a 11 lot of work. It is in a whole lot better condition than 12 when we started. We can get that sort of thing 13 addressed in our comments when it is published in the 14 Register. But I really only have two comments about it 15 now. That would be the one. And the other is in A, 16 item A, after having discussed with -- with Phil and 17 Ms. Wilkov, I think I understand what item A is about is 18 just maintaining that the copies of those documents that 19 are in your -- that the organization should have. So it 20 is a starting point for illuminating what their 21 activities are. 22 My only concern is it is a language 23 concern, when it says, in order to ascertain whether the 24 activity is one that goes under that exemption, maintain 25 and make available a copy of this application. It is my 0080 1 understanding -- and when I had some involvement with 2 501(C)(3), for example, in our application, we said we 3 are going to maintain -- we are going to do a school. 4 And that was clearly authorized, and we got our tax 5 exempt status for it. Later on, the school filled up, 6 and we decided, well, we need to start getting -- giving 7 some scholarships out for to some kids to go to some 8 schools that couldn't go to our school. Well, that was 9 still consistent with our tax exempt status, but there 10 was nothing said about it in our original application. 11 Now, I am understanding, and I am hoping that you will 12 confirm with more than a nod so our court reporter can 13 get it, that the purpose of this is to illuminate kind 14 of where you started to get what you can to start 15 documenting what kinds of things the organization is 16 supposed to do, but as long as that -- as long as their 17 activity is consistent with that tax exempt status, it 18 may not be mentioned in the application. But in other 19 words, that is not going to completely corral it. Are 20 we in agreement on that? 21 MR. SANDERSON: I -- generally, I think we 22 are in agreement that it is with the tax exempt status 23 of the 501(C)(3), (4), (8), (10), or whatever the 24 designation is. And for the most part, schools and 25 education and religion are all 501(C)(3s), so there are 0081 1 several other activities that a 501(C)(3) can do. And 2 so I don't think that we would disallow a distribution 3 made under that type of activity. 4 MR. BRESNEN: Okay. Well, I think we are 5 on the same page. Basically, as I am understanding it, 6 this is about documentation of kind as a starting point 7 for audit purposes and review purposes, and not intended 8 to limit in any way what the people might do as long as 9 it is consistent with their tax exempt status, which is 10 what the statute provides. Those would be my two 11 comments. 12 MS. BRACKETT: Okay. Thank you. 13 MR. BRESNEN: Okay. Thank you. 14 MR. MANIO: Steve -- 15 MR. BRESNEN: Oh, sorry. 16 MR. MANIO: Just one question. 17 MR. BRESNEN: Yes, sir. 18 MR. MANIO: Do you have a suggestion to 19 replace the word ascertain or no? 20 MR. BRESNEN: Well, I think really you 21 could probably strike out everything down to the words, 22 an organization must maintain and make available, 23 because the first part of that is what makes me think 24 that, you know, if you say there is a principle in law 25 that when you mention one thing, it excludes another, 0082 1 and it is a Latin phrase that I never can remember. So 2 I am just concerned that when you say, in order to 3 ascertain it, you must maintain these things, and I 4 think if you just say an organization must maintain and 5 make available those things. 6 Now, we will probably need to give the 7 people a heads-up about this and give them some time to 8 get these records together, because some of these 9 organizations are real old. And we are probably going 10 to have some old organization waiver or exemption or 11 something. I don't know if you can get those original 12 documents back from the IRS, but you know, they have -- 13 obviously, they had a copy to begin with, but they may 14 have misplaced it, or lost it, or it may not have got 15 past the one secretary/treasurer to the next or 16 whatever. So I think we need to think about some 17 practical problems like that. But that is what I would 18 do, I would just start with, an organization must 19 maintain those things. 20 21 MR. SANDERSON: And I guess I would 22 respond to that just to -- I think if we put that in 23 there, because somebody is going to come up and say, 24 well, why do you want those records? Well, that's why 25 we want them, is to make sure that they are under these 0083 1 type of activities. 2 MR. BRESNEN: As long as we are not 3 limiting someone beyond what the federal tax exempt 4 status will let them do, I don't have a huge problem 5 with it. But that's the way I would clean it up, if I 6 was going to do it from the table here. Thanks. 7 MS. BRACKETT: Earl Markham. 8 MR. MARKHAM: I think my concerns have 9 been answered so far. 10 MS. BRACKETT: Okay. Than you. And Mrs. 11 Markham, do you feel the same way? 12 MRS. MARKHAM: No, I think I would like to 13 come up there and have one question answered. 14 MS. BRACKETT: All right. 15 MRS. MARKHAM: I am Velma Markham with 16 AMVETS Post 52 in Dallas. And my question is, can we 17 take the money out of our bingo account to buy food for 18 baskets to give to the needy families at Thanksgiving 19 and at Christmas time? 20 MS. BRACKETT: Mario, did your committee 21 discuss that? 22 MR. MANIO: No, we did not. I'm sorry. I 23 don't think we went to that level of discussion. But 24 let me go back to the general principle in here, which, 25 is, is the purpose of your organization, is that kind of 0084 1 activity covered? That would be our guiding principle 2 in here, if it says that, yes, your organization is 3 specifically organized to do that thing among others, 4 then. 5 MRS. MARKHAM: Then that's okay? 6 MR. SANDERSON: I don't know if we can get 7 into exact specifics for each individual case in this 8 discussion here for general practical purposes. And we 9 are talking in the rule that anything that is allowed 10 with your exempt status. If the 501(C)(19), if there is 11 somewhere in there that allows the use of their, you 12 know, the activities to benefit needy and deserving 13 individuals, then I would say, yes, that could be -- 14 that would be an activity that you could use the money 15 for. 16 MS. BRACKETT: All right. Could they make 17 a donation to another organization that provides food 18 and make sure that that organization -- let's say a food 19 bank, soup kitchen? 20 MR. SANDERSON: There again, I don't know 21 if we can get into real specifics. We may end up having 22 to do private letter rulings like the IRS. 23 MS. BRACKETT: But when this comes to 24 pass, we will be prepared; right, for these types? 25 MR. SANDERSON: Yes, ma'am. 0085 1 MS. BRACKETT: All right. 2 MR. SANDERSON: And I am sure it will be 3 an item that will be added to our operator training 4 program in very great detail. 5 MRS. MARKHAM: Thank you. 6 MS. BRACKETT: Thank you, Mrs. Markham. 7 MR. MANIO: Just an additional comment 8 regarding that question. If you will notice, the 9 language in the rule is very general. The first version 10 that we had was very specific, and that's why it was 11 nine pages long, and we tried to get away from that and 12 just give you the general principles that the commission 13 will follow. 14 MRS. MARKHAM: Thank you. 15 MS. BRACKETT: Charles Hutchings, did you 16 want to make a comment on this? 17 MR. HUTCHINGS: Thank you. Under the 18 documents needed that was discussed earlier, the 10 -- 19 what is it, 1024 or 1023, your Veterans organizations 20 and a lot of other organizations are nationally 21 chartered. In other words, we apply to a national 22 organization for a charter. They got those exemptions 23 in AMVETS case back in 1947. We are not going to -- 24 they are not going to give us those documents. We are 25 not going to be able to come up with documents of that 0086 1 type. And whatever it said in 1947 wouldn't be 2 concurrent with what goes on today in the organization. 3 Constitution bylaws get changed every year as we go to 4 the national convention. 5 So that would just be -- that would be 6 useless. We probably couldn't get it to start with. 7 There has to be other avenues by which we can come up 8 with documentation that says, you know, what the 9 purposes are and all. And each license does file that 10 on the deal, although it has been restricted over a 11 period of time exactly what can be put on the license. 12 In certain areas, it was boxes and stuff to be checked 13 as to what your charitable purposes were, but they 14 limited you to certain areas, and then they would say, 15 you can't check but one box, no matter how many boxes. 16 Then I understand there was someplace else that you 17 could put that stuff in, but I am sure that was 18 overlooked by some of us. It is just going to be a -- 19 it is going to be difficult for these organizations who 20 have been around awhile, who are nationally chartered to 21 come up with all of them documents and to back up 22 whatever their charitable purposes are. 23 But like I say, constitution bylaws change 24 every year, especially in Veterans organizations when 25 they have their annual meeting of their national 0087 1 departments, and even their state departments. AMVETS 2 hold a state meeting, a state convention every year, and 3 things change in our constitution bylaws as to what we 4 do, what we don't do, such as that. 5 MR. SANDERSON: On the last sentence of 6 paragraph A, starting on page -- I am sorry, on line 15, 7 which I don't know if you have got them numbered, it 8 says, or any enabling document and any amendments and 9 any adoptive bylaws that provide in writing specific 10 uses of the proceeds. So even though your national 11 convention you change bylaws or change something, as 12 long as you have those amendments on file that indicate 13 how the money is going to be used and what your purposes 14 are, then that would comply with that section. 15 MR. HUTCHINGS: Well, I don't know as -- 16 you know, your constitution bylaws doesn't exactly say, 17 you know, let's see, what would be a good cause, as 18 Velma Markham said, you know, we want each post out here 19 to go out and do 50 baskets for the needy and poor, go 20 to a school and to the church to find them. What we 21 have is community service type situation where that 22 stuff is, you know, it's just implied, intended, and 23 that's what you have to do in order to be in good 24 standing in the organization. 25 MR. SANDERSON: And there again, if it is 0088 1 consistent with the exempt status that you have from the 2 IRS, then it will be allowed. I think that's what -- 3 when 2519 changed this to the exempt status, then that's 4 what their intention was, the legislative intent was 5 that the organizations be allowed to use it for what the 6 IRS would say that their exempt status is set for. 7 MR. HUTCHINGS: Well, we can live with 8 what -- we can live with what the IRS says. I have been 9 through IRS audits. You know, back a ways down the 10 road, you know, someone comes to the post and say, we 11 need 250 more dollars. We have a relative or something 12 that has passed away. We would contact the funeral 13 home. If this was the case, if they needed 250 more 14 dollars to get this person interned, we would give them 15 the $250. There is really nothing, you know, that says 16 that -- well, what I -- what -- I guess where I am going 17 is, you know, the intentions of such things are 18 wonderful. You know, people are in distress, you know, 19 you are out there, would that be considered a -- for a 20 Veteran's organization, would you consider that an 21 appropriate donation? 22 MR. SANDERSON: Well, as I said earlier, I 23 don't know if we can get into complete specifics. Our 24 auditors and our staff are still trying to learn the IRS 25 Code, so you know, once we get a better handle on that, 0089 1 then we will be able to make some determinations for 2 you. 3 MR. HUTCHINGS: Okay. Because from what I 4 am reading in the rule, as I see it here, there are a 5 lot of things that under the IRS are allowable, it looks 6 like we are trying to come back or whatever in this 7 rule. So it is just -- the attitude of the IRS is as 8 long as it is any -- basically a charitable purpose -- 9 or from the audits I have had, as long as you are using 10 it for a charitable purpose, and you are not actually 11 taking the money out and just giving money to members or 12 whatever, well, then they consider it pretty much within 13 line that you roll along and that's -- you know. 14 MR. SANDERSON: And if that is the case, 15 we probably would, too. 16 MR. HUTCHINGS: Thank you very much. 17 Appreciate it. 18 MS. BRACKETT: Thank you. Don Bishop, did 19 you want to -- 20 MR. BISHOP: I am covered. Thank you very 21 much. 22 MS. BRACKETT: Okay. Thank you. And 23 Stephen Fenogino. Stephen, I'm going to kind of watch 24 the clock and call time on you. 25 MR. FENOGINO: For the record, my name is 0090 1 Stephen Fenogino. I have already appeared here today. 2 Subparagraph A, I think needs to be wordsmithed. I was 3 not under the impression that what Phil had previously 4 answered, that if you didn't have your form 1023 or 5 1024, you were out of luck. And what I hear him saying 6 is, well, if you didn't have a 1023 -- and one 7 organization I represent have been in existence over 50 8 years, they don't have a 1023. They can't find it. 9 They have asked under the Federal Open Records Act for a 10 copy from the IRS, and the IRS has already asked them, 11 well, you don't need it, why are you asking for it? I 12 don't think the IRS will have it. And so if that's -- 13 the way I first read it, if -- you had to have the 1023 14 or you would be subject to being deemed permanently, and 15 I don't think that's what Phil said. So if that's the 16 case, we can wordsmith that. And it does not need to be 17 held back, I don't think. 18 Under subparagraph (C)(1) first sentence, 19 I would just suggest that in the drafting, that 20 depending upon how the unit accounting rule is drafted, 21 that that sentence, the first sentence be consistent 22 with, because it may be that the unit accounting rule 23 says something different. I do note that Norma and Phil 24 are trying to hide something, because if you will notice 25 carefully in reading this, there is no subparagraph 3. 0091 1 You jump from paragraph 1, 2 to 4. And I know that the 2 staff are up to something. They just haven't told us 3 what it is. And I want y'all to know I caught them. 4 MS. BRACKETT: You are sounding like the 5 IRS yourself there. 6 MR. ATKINS: That's why we give you those, 7 to be our proofreader. 8 MR. SANDERSON: Number 3 is our positive 9 agenda that we are trying to -- 10 MR. FENOGINO: That shouldn't come from my 11 time, Madam Chair. 12 MR. ATKINS: You are the proofreader, and 13 Larry is the spellchecker. 14 MR. FENOGINO: And then finally, (F)(1), 15 page 4, line 7, whether the expenditure was authorized 16 in the governing body of the organization. Many times 17 the expenditures will not be authorized by the governing 18 body. The executive director, CEO, now authorize it. 19 Again, that is a wordsmithing issue. And I think we are 20 ready to move forward, Madam Chair, at least my -- the 21 organization that I represent. Thank you. Was that 22 short enough? 23 MS. BRACKETT: It certainly was. 24 Appreciate it. 25 Don Bishop, did you want to speak to this? 0092 1 I am sorry, I am looking at the wrong thing. Did you 2 want to speak again? 3 MR. BISHOP: Not particularly. 4 MS. BRACKETT: Darleen? 5 MS. MASHBURN: Darleen Mashburn, Minnehaha 6 counsel number 23, approved order of Redmen. On line 7 number (A)(2), the license authorized organization 8 submit a quarterly form described by the commission. If 9 we have one more form that I have to fill out, it is 10 really not necessary. When they come to audit, okay, 11 they look through your general fund. They see your 12 canceled checks. They see where the money goes. I 13 don't really see a point in having this in this rule. 14 And like Stephen, some of the other people have said, 15 regarding form 1023 and 1024, I am sure my organization 16 has one somewhere with the IRS. I don't think the IRS 17 knows where it is. And that's all I wanted to say. 18 Thanks. 19 MR. ATKINS: Darleen, would you spell the 20 name of your organization for the court reporter. 21 MS. MASHBURN: M-i-n-n-e-h-a-h-a. 22 MS. BRACKETT: Ramon Rodriguez, do you 23 want to make a comment on this? 24 MR. RODRIGUEZ: I think Don covered 25 everything. 0093 1 MS. BRACKETT: All right. Thank you. 2 MR. MANIO: I would like to respond to 3 Darleen's comment, if I may. 4 MS. BRACKETT: Yes. 5 MR. MANIO: Regarding the forms, and I 6 would like to back this up with the unit. The lottery 7 commission is in the process of designing a form for 8 members of the unit. And the reason for that is the 9 quarterly form that is in existence today will no longer 10 apply to units -- to the members of a unit accounting. 11 So what I am thinking -- here is the thought, if there 12 is a unit manager or a designated agent, they will 13 file -- they are supposed to file a quarterly taxes form 14 for the unit. Today, that is done by the individual 15 charities. Now, for members of the unit, they will need 16 to file a quarterly report, too. And my understanding 17 is on that report it will include the disbursements for 18 charitable activities. Now, that is a form that can be 19 used in connection with this section in here. So we may 20 be eliminating one and creating two, but it is actually 21 just a new one. 22 MS. GREENFIELD: Where it says, a form 23 prescribed by the commission, could we provide something 24 maybe like a check register for distribution, does it 25 have to be -- 0094 1 MR. MANIO: I don't have an answer for 2 that. That is an administrative matter. 3 MR. SANDERSON: A form prescribed by the 4 commission would be a form that we would design and 5 provide to you to fill out. Now, in the past, if you do 6 something electronically and develop, as long as -- as 7 long as you prepare a form that is consistent with what 8 we are prescribing, then you can use your own form, so 9 to speak, as long as the information that we're 10 requesting in our form is on your form. 11 MS. GREENFIELD: I was thinking it might 12 be a little less burdensome for organizations, if, you 13 know, they use a computerized accounting software, if 14 they can just, you know, choose that distribution 15 account, print it out, and that could be the quarterly. 16 MR. SANDERSON: That would probably work. 17 MS. GREENFIELD: That would work. 18 MR. SANDERSON: Yes. 19 MR. MANIO: And the other comment is, 20 there is a subcommittee on forms that have -- I think 21 the members have been designated for the forms for a 22 subcommittee. Not yet. But it is something that will 23 be organized fairly soon. And a function of that 24 subcommittee will be to look at various forms in use 25 today and see where these forms can be consolidated, 0095 1 which forms can be minimized or eliminated and that kind 2 of thing. So even if we are going to make or create 3 another form for the purpose of this rule, it will still 4 be subject to a review by the subcommittee, and 5 recommendations will be made accordingly. 6 MS. BRACKETT: Okay. Thank you. Are we 7 ready to take action on this issue or this agenda item, 8 number 5? The action requested is that the use of net 9 proceeds for charitable purposes, subcommittee requests 10 that the Bingo Advisory Committee recommend to the Texas 11 Lottery Commission that proposed new administrative rule 12 402.598, use of net proceeds for charitable purposes, be 13 published in the Texas Register for a formal comment. 14 MR. PAVLOVSKY: I will second it, if you 15 will make the motion. I move that it be published. I 16 recommend it to the lottery commission to be published. 17 MR. MANIO: Conditional upon rewording of 18 certain phrases and biographs that we discussed today. 19 MR. PAVLOVSKY: I agree with that. 20 MS. GREENFIELD: I second it. 21 MS. BRACKETT: Okay. He moved, and then 22 Mario seconded it, and I am sure -- and all right. Are 23 you ready for the question? Are you ready to vote? 24 Okay. All those in favor please say aye. 25 (All in favor.) 0096 1 MS. BRACKETT: And all those opposed? 2 Okay. Then, this will be -- this will be changed 3 wording and published. 4 If it is -- if I have permission from the 5 rest of the membership, I would like to move on to item 6 number 11 because that is an action item and that would 7 be nice to get that taken care of today. And Mario, 8 would you please present this bond requirements. 9 MR. MANIO: Okay. What I would like to 10 discuss with you is some of the bonding issues that I 11 have experienced in the last several months. During 12 this year, I had the privilege of assisting two 13 charities applying for a original license to conduct 14 bingo. One of them, which we will call charity A, put 15 in their application sometime in January of this year. 16 And so we sat down and calculated the amount of 17 quarterly prize taxes that they will have to -- that 18 they will be expected or estimated to report to the 19 commission. And it came out about 7,500 per quarter. 20 At the time, that was preHB2519. The 21 amount of bond required was only one quarter of the 22 prize taxes that are due, so it is 7,500. Accordingly, 23 they filed for -- or they applied for a bond, and they 24 were able to get a bond issued at the cost of $200 25 premium per year. And the charity has started from 0097 1 nothing. The bingo license was issued in May. 2 Now, some things have changed out there. 3 HB2519 was enacted. Charity B applied for a license in 4 September. The requirements now -- the requirements for 5 the bond amount is three quarters of the prize taxes. 6 So it is approximately three times 7,500. In fact, the 7 lottery commission wanted -- wanted them to post a bond 8 for $22,000. Subsequently -- well, they were not able 9 to get the bond, and subsequently, the application was 10 withdrawn. 11 Now, here is the difference between the 12 two charities. Charity A applied with an insurance 13 company that they are doing liability insurance business 14 with. And so that's the reason why they were able to 15 get the bond for $200 a year. Now, charity B, their 16 liability to the company is not doing bond business, so 17 they had to go out some -- go out in the market and look 18 for a bonding company. They found some, including some 19 companies that are listed on our website, on our 20 telecommunication website. 21 But now here is the deal. The bonding 22 companies want 50 percent in cash. So this charity was 23 looking at 11,000 security deposit that they have to 24 prove up within the bonding company. So we do have a -- 25 well, what I would like to do today is present this -- 0098 1 well, request the BAC to look into this matter and make 2 a determination whether this is an isolated case or is 3 this across the state. If it is across the state, we 4 have a serious bonding issue, and we will have to work 5 with the lottery commission, and maybe they can relax 6 the three quarters' requirement for bond amount. 7 See, if they had -- if this was only in 8 the -- like if the bonding part was only for one 9 quarter, then they would have -- this charity would have 10 to come up with about $8,500 security deposit for the 11 bonding company instead of 11,000. Now, this charity -- 12 well, if that is a charity who can afford to set aside 13 11,000 for security -- for security deposit for the 14 bond, chances are they probably have a lot more in their 15 treasury, and they do have some sources of revenue for 16 the fund raising. They probably don't need bingo. The 17 smaller charities who cannot afford 11,000 are the ones 18 who need to go into bingo. And yet, they are precluded 19 because of this potential problems in bonding 20 requirements. 21 So this is probably an issue not only for 22 the lottery commission, it may also be an issue for the 23 insurance commissioner, because there is a practice in 24 here wherein the bonding companies are requiring 25 applicants to have other insurance business with them. 0099 1 MS. BRACKETT: Okay. So what action are 2 you asking that they -- that a study be made of this or 3 report back? 4 MR. MANIO: Yes. Because this is -- this 5 is only one case, and I am not sure that this is 6 happening all over the state. But if this is a 7 prevalent situation, then we have a real problem on our 8 hands. And a lot of, you know, charitable organizations 9 will never be able to get into bingo. 10 MR. ATKINS: If I can, I would like to 11 call Terry Shankle forward. She may be able to answer 12 some of Mario's questions. Unfortunately, we didn't 13 have a chance to talk to Mario about this prior to the 14 meeting, so I don't know that we are going to be 15 prepared to fully answer some of the questions. 16 But as I mentioned earlier, let me just 17 give you an idea of the situation that we are facing. I 18 mentioned that since 1994, there is approximately $3 19 million in outstanding liabilities from the state from 20 bingo operators who have failed to pay their prize fees 21 penalties and interest. And it breaks out to about 22 one-and-a-half million dollars for prize fees and about 23 one-and-a-half for penalty and interest. 24 In 1994, the total amount of liability for 25 that year was about $735,000. In 2003, this isn't a 0100 1 complete year, but we are pretty close, it is around 2 $53,000. And I think a big part of that is because 3 Ms. Shankle and her responsibilities has been very 4 aggressive in pursuing organizations and collecting on 5 bonds that have become delinquent to the state. And as 6 we mentioned earlier, that is our legal obligation, that 7 is our fiduciary responsibility to the state of Texas. 8 And again, not having the opportunity to discuss this 9 with you before, you know, minus some very compelling 10 evidence, that those numbers aren't going to go back up 11 through the roof if we don't have the appropriate amount 12 to cover those liabilities, I can't -- you know, I can't 13 see how we can justify it. 14 MS. SHANKLE: I would just like to make a 15 statement that -- 16 MR. ATKINS: Turn your microphone on. 17 MS. SHANKLE: There was nothing in 2519 18 that had anything to do with a conductor or nonprofit -- 19 a conductor spont. It was only unit managers. I think 20 what probably happened is that your organization A came 21 in prior to the current rule that was adopted. And the 22 organization -- my section, my area, is the one that 23 looks at on an original license, on organizations in 24 that area and what they are doing. And that's how we 25 establish what the bond will be. 0101 1 Again, we do have, as you said, insurance 2 companies on our website that do the surety bonds, but 3 they can also put it up in cash or in a CD where they 4 earn the interest. And if they have two -- or eight 5 quarters of tax paying history that is good, with no 6 problems, then we return that bond to them. If they 7 don't, then we continue to maintain it until they go out 8 of business. 9 MR. MANIO: All right. But I am not 10 really expecting any complete answers. I just wanted to 11 bring this matter up to the attention of the committee 12 today. But correct me if I am wrong, the law says that 13 you, the elected commission, may set a bond amount no 14 more than three times the quarterly -- alleged quarterly 15 dues. 16 MR. ATKINS: Not to exceed. 17 MR. MANIO: Not to exceed three quarters. 18 MR. ATKINS: Correct. 19 MR. MANIO: That's right. And the old 20 rule it was only one quarter requirement and now it is 21 three quarters under the new rule. 22 MS. SHANKLE: Say that again, I am sorry. 23 MR. MANIO: Under the old -- under the old 24 rule, our bond requirement was only one quarter. 25 MS. SHANKLE: I will -- I probably will 0102 1 disagree with you. It was started at $1900, and I think 2 it was still, based on 514, of up to three times. I 3 have seen bonds -- and I am sorry, I just lost my train 4 of thought. 5 MR. MANIO: Okay. Well, anyway, my main 6 concern in here it is so hard now to get a new license 7 if you don't have this kind of money. And even if you 8 do, these organizations probably will not find that kind 9 of money for seven quarters because they need the cash 10 flow to support the charitable activities. 11 MS. SHANKLE: Well, one reason that we do 12 require three times is that by the time of the due date, 13 one quarter has elapsed. By the time we do an 14 opportunity to show compliance for that organization to 15 pay what is due and then have a hearing, three quarters 16 have elapsed. And that again, as Mr. Atkins said, is 17 that is my job to secure that the state does not lose 18 money. 19 MR. MANIO: Right. And I do understand 20 those -- the rationale for imposing the three quarters. 21 But -- well, the main concern in here is our -- the 22 number of charities is shrinking, and if we don't 23 replace those charities in a certain amount of period of 24 time, we will have no charities to regulate. And so we 25 need to make it easier for new charities to get a 0103 1 license. I don't know how -- if that is possible, or if 2 it is possible to reduce from three quarters to two 3 quarters or one quarter, you know, the bond amount. But 4 that is only one part of the picture. The other part of 5 the picture is this new practice by surety companies who 6 are wanting 50 percent cash deposit. 7 MR. ATKINS: And I didn't mean to imply, 8 you know, you are welcome to work with Terry. 9 MR. MANIO: Uh-huh. 10 MR. ATKINS: On looking into this matter. 11 But I -- you know, I think it is only fair for you to 12 know upfront where we are going to be coming from and 13 kind of the threshold you are going to be looking at. 14 It is just, you know, for us a very serious matter. And 15 I appreciate Ms. Shankle's efforts and the fact that 16 those liabilities have gone down so much. And I know as 17 a taxpayer, you appreciate that. And that is what we 18 have to balance. 19 MR. MANIO: So I don't know where to go 20 from here, except to bring it to your attention and 21 maybe we can explore this problem. 22 MS. BRACKETT: So are you wanting to 23 recommend that a study -- that we look into this and see 24 if it can't possibly be reduced, or if that can be 25 changed, and come back with a recommendation, you work 0104 1 with them and bring a recommendation back? 2 MR. MANIO: Yeah, I would be willing to 3 work with them on something like that. But if I can 4 enlist the help of Terry Shankle here. 5 MS. BRACKETT: Okay. 6 MR. MANIO: And we can probably explore 7 the market together. 8 MS. BRACKETT: Okay. Then Mario, we will 9 expect to be hearing from you at our next meeting, bring 10 us to date on this, and work with other bingo licensees 11 and also the bingo division commission. 12 MR. MANIO: I may need another member of 13 the committee to help me. 14 MS. BRACKETT: Then you certainly have 15 every right to call -- we have got a volunteer already. 16 Good. All right. Thank you. Thank you for that. 17 Let's go now to item number 10, which is report and 18 possible discussion on a vacancy on the Bingo Advisory 19 Committee. 20 MR. ATKINS: Thank you, Madam Chairman, 21 members. I think it was mentioned earlier that Marilyn 22 Matthews has submitted her resignation to the Bingo 23 Advisory Committee as of October 9th, 2003. As you 24 know, Marilyn served as the conductor/lessor 25 representative on the advisory committee, and we 0105 1 certainly thank her and appreciate her work. The staff 2 has posted this opening on the website, and there will 3 also be an announcement on -- in the upcoming issue of 4 the bingo bulletin, and we are hoping to have some 5 nominations for the commission to consider after the 6 first of the year. And we would certainly encourage 7 each of to you advertise this opening and encourage 8 anyone who may be interested to submit a nomination 9 form. Again, that nomination form is available on the 10 website. 11 Do again keep in mind this is the 12 conductor/lessor position, so this would be an 13 organization that conducts or is licensed as both a 14 lessor and an organization authorized to conduct 15 charitable bingo. At the November 24th commission 16 meeting, I informed them of Marilyn's recommendation and 17 got confirmation from them that they would like to 18 continue with the process that has been used in the 19 past. Specifically, if you will recall, when we had the 20 vacancy in the public member position, the chair of the 21 commission, Chairman Clowe, myself, and Virginia Bright, 22 the chair of the advisory committee, met with some of 23 the interested members to discuss the advisory committee 24 their expectations, etcetera. And the commission has 25 expressed an interest that that process be followed with 0106 1 this opening. 2 And I do right now just primarily want to 3 encourage all of you, again, if you know of anyone that 4 is interested, please ask them to submit a nomination 5 form. 6 MS. BRACKETT: And by all of you, you mean 7 everyone in the room; correct? 8 MR. ATKINS: Everyone in the room. 9 MS. BRACKETT: Everyone in the industry. 10 MR. ATKINS: Or even if they are out of 11 the room, if they can hear our voices. 12 MS. BRACKETT: Within the sound of our 13 voices. All right. Let me pause just a moment here. 14 All right. We are going to take agenda item number 7, 15 which is report and possible discussion on calendar year 16 2003 third quarter bingo financial information and 17 statistics. 18 MR. ATKINS: And I would also, members, if 19 I could, call Ms. Shankle back. And if you will bear 20 with me, once I find -- members, as you know, the third 21 quarter of 2002 ended on September 30th, and you have in 22 your notebook several different spreadsheets that 23 summarized much of the information that is contained in 24 those reports. Also, as you will recall, House Bill 25 2519 moved the filing date for these reports back by ten 0107 1 days, which is why this information is coming to you a 2 little later than it would have in the past. And I just 3 wanted to take the time to highlight some of the 4 information that is in those spreadsheets, and then 5 either Terry or myself will be happy to try and answer 6 any questions you might have. 7 Total gross receipts have increased from 8 the second quarter of 2003 by four-and-a-half million 9 dollars or 3.26 percent. This -- this increase, again, 10 we think it is primarily driven by the continued growth 11 of pull tab sales. From the second quarter of 2003, 12 pull tab gross receipts increased $3.7 million or 13 twelve-and-a-half percent. And figures for 2003 to date 14 show that for the similar period in 2002, pull tab sales 15 have increased $28 million or almost 44 percent. For 16 2003 to date, compared to the similar period for 2002, 17 pull tab prizes have increased almost $22 million or 18 almost 48 percent. And finally, for 2003 to date, 19 compared to similar period for 2002, the following 20 information has been gathered. Charitable distributions 21 have shown an overall decrease of $1.6 million or about 22 six-and-a-half percent. Attendance has shown an overall 23 increase of one million dollars or four-and-a-half 24 percent. And expenses have shown a slight increase of 25 $400,000 or .9 percent. 0108 1 And real quickly, the information you have 2 in the notebook, of course, is Terry's transmittal memo. 3 The first spreadsheet compares a couple of things. It 4 compares the second quarter of 2003 to the third quarter 5 of 2003. That is that first block of figures. And then 6 the second block of figures compares the third quarter 7 of 2002 to the third quarter of 2003. 8 Next, you have what we call a detail 9 report, and that will break down by quarter for each 10 year. So for example, in the top left corner, you have 11 the first -- I am sorry, the fourth quarter for 2003, 12 2002, 2001, and of course, we don't have the fourth 13 quarter figures for 2003 yet. That is what that is 14 blank. But you can get a quarter-to-quarter comparison 15 for those three years. And then finally, the last 16 spreadsheet that you have gives the comparison of the 17 first three quarters of 2002 to the first three quarters 18 of 2003. 19 MS. BRACKETT: Okay. Does anyone have any 20 questions or comments? All right. If there are no 21 questions or comments, the quarter bingo information and 22 stats item number 7, we will move on to item number 8, 23 report and possible discussion of survey bingo players. 24 And Billy will be reporting for Jack, who could not be 25 here today. 0109 1 MR. ATKINS: We are going to ask to pass 2 on that, if we are going to have to break in five 3 minutes. 4 MS. BRACKETT: Okay. 5 MR. ATKINS: Liz Jambor has done a very, I 6 think, thorough presentation for you, and there is a lot 7 of valuable information in that presentation. She did 8 ask that -- she didn't want to rush through it. She 9 wanted to be able to spend some time going over a lot of 10 that information with you. But I will tell you that the 11 entire report is out on the website, if you would like 12 to go out there and view that prior to seeing her 13 presentation. I would suggest you might start talking 14 about the next meeting for today. 15 MS. BRACKETT: All right. We need to set 16 a day and a date for the next meeting. February 19th 17 has been suggested, February 19th and March 19th. But 18 how does that work out with the -- 19 MR. ATKINS: I just wanted to check. I 20 didn't know if there were any pending items that we may 21 need to meet earlier than February? 22 MR. SANDERSON: I am not aware of any, 23 because most of the discussion today that centered 24 around the licensing rules and the unit manager, unit 25 accounting, and the use of proceeds were all my 0110 1 understanding to move forward on those areas. Licensing 2 was to move forward with the subcommittee's 3 recommendation. The unit manager was to move forward 4 with, you know, comments. Use of proceeds to move 5 forward with comments. 6 And the unit accounting would be the only 7 other one, and so I don't know if it would be the desire 8 of the BAC that if there is -- the talking points that 9 we had today is where we are leaning towards drafting 10 the rule from. And like I said, we will put that out on 11 the website, if approved to do so, and receive 12 additional informal comments on those. If you want that 13 particular rule to come back to you before it goes to 14 the commission, then that would be the only other 15 possible reason to meet before February the 19th. 16 MS. BRACKETT: That was suggested. 17 MR. SANDERSON: So. 18 MR. ATKINS: Well, given the complexity 19 and the interest of that rule, I think it would be 20 better if it did come back before the advisory committee 21 for their review. 22 MS. BRACKETT: And for public comment, 23 too. 24 MR. ATKINS: Uh-huh. I don't -- so my 25 question would be when would there be a draft to bring 0111 1 forward? 2 MS. BRACKETT: You are on your own, Phil. 3 MR. SANDERSON: Well, and there again, you 4 know, I think that we could probably have a draft some 5 time in the latter part of January based on the talking 6 points that we had in, you know, the notebook today. 7 Because for the most part, it is just the recordkeeping 8 requirements. And if we don't address anything that 9 would conflict with federal statute, then it would be up 10 to the organizations to make sure they didn't violate 11 federal statute. 12 MR. ATKINS: Well, let me -- Steve, have 13 you been involved -- you have been involved in those 14 discussions? 15 MR. FENOGINO: For the record, Steve 16 Fenogino. And you are talking about the discussions on 17 unit accounting? 18 MR. ATKINS: Yes, sir. 19 MR. FENOGINO: Yes, sir, I have. 20 MR. ATKINS: Do you have a position on 21 moving that forward? 22 MR. FENOGINO: I think, and I was just 23 visiting with Penny Wilkov, and Kim had asked me 24 earlier, and you and I had discussed earlier, I think it 25 would be helpful if there was another committee meeting 0112 1 of the working group to more -- to try to formalize -- 2 there are -- IRS has concerns, and they are willing to 3 visit with at least the staff, if we could be a part of 4 that. And then I think my clients are willing within -- 5 if we can understand in more detail what the IRS 6 concerns are, I think some of my clients will be willing 7 to pony up a private letter ruling. And if we get our 8 act together quickly, at least the letter ruling can be 9 going forward which might give you-all some direction 10 and -- but in answer to your question, I think if you 11 are looking at January or February to try to take the 12 talking points into more ruling, which I think that is a 13 good schedule. 14 MR. ATKINS: January? 15 MR. FENOGINO: I would prefer January over 16 February. My only concern is if we could get -- I don't 17 know what the IRS position or their scheduling is, but 18 it would be helpful I think because one of the concerns 19 that I have always had is charities read the rule and 20 they say, okay, we can do this. And they go ahead and 21 do it, and they comply with your rule, and then they get 22 bit by the IRS. And I don't think y'all want to have 23 that happen, and them say, well, lottery said it was 24 okay. Well, you did and you didn't. But they did 25 whatever the lottery rule said. Now, they have got a 0113 1 problem with the IRS. 2 MS. KIPLIN: Madam Chair, if I may, my 3 name is Kimberly Kiplin. For the record, I am the 4 general counsel for the lottery commission. Mr. 5 Fenogino is correct in some of the concerns. I will 6 tell you that I have been asked the question as recently 7 as this morning about why are you moving forward on a 8 rule when you don't even know where the IRS is going, 9 and it may ultimately, at the end of the day, make 10 organizations ineligible to be conductors because they 11 have lost their 501(C) exemption. That is a good 12 question. It is a real good question. So my -- my 13 sense is that we do need to have a meeting of the 14 working group. I am in full agreement of that before it 15 is -- anything is brought back to you-all, to address 16 that threshold question right out of the bag, and then 17 to -- if the working group decides we should still need 18 to proceed, I think there needs to be some consideration 19 of putting in some language in the rule that says, you 20 know, you are on your own. We will do the best we can, 21 but there is an IRS issue that is outstanding. 22 My feeling is that it may have a request 23 for a letter ruling or an IRS ruling, but it may take 24 some time to get the answer, the ruling from the IRS. 25 So there are two different tracks that are running, two 0114 1 different dynamics. And what I would like is to make 2 sure that if an organization decides to engage in that 3 kind of an approach, you know, unit approach, that they 4 recognize the risk very clearly, and they are expressly 5 set out or identified within a rule. And those are the 6 kind of things that we have been talking about in the 7 back of the room. Be glad to answer any questions, if 8 anybody has any. 9 MR. ATKINS: Well, I appreciate those 10 comments, and Steve's comments, and I appreciate 11 everyone's desire to get it right the first time, or at 12 least as right as we can the first time. And I guess 13 this is just where I want to make sure that I have made 14 myself clear as the bingo director, I want this moving 15 forward, and I am directing that to my staff, to any 16 members of the industry and whoever on this committee is 17 working on that. If -- if we need to take the time in 18 February to have something, then I want to make sure 19 that we are doing the work to have something, and that, 20 you know, we can come back in February and say, okay, we 21 have -- you know, we have done the best we can, whatever 22 way the chips fall. 23 MS. BRACKETT: Well, now, I was thinking 24 you thought we should meet in January to get things in 25 better order. 0115 1 MR. ATKINS: Well, I am hearing that, 2 yeah, this working group is going to need more time -- 3 MS. BRACKETT: Oh, okay. 4 MR. ATKINS: -- to develop that. And I 5 believe this is the only outstanding issue that we have. 6 I mean, I know we have some other rules that are being 7 contemplated or -- 8 MR. SANDERSON: There are some other rules 9 that are being contemplated and discussed, so to speak. 10 The only other rules that I am aware of that we may need 11 to bring forward on would be amendments to existing 12 rules that -- that deal with the 25th being a reporting 13 date, and the bond rule itself, 583, I believe, that 14 will need to be amended whenever the unit manager 15 determination is made. 16 MS. BRACKETT: Okay. Well, February 19th 17 was suggested but suggested by someone who is not here 18 today, who was unable to attend. So I'm wondering, that 19 is the third week of February, should we go to the last 20 week, the 26th or 27th, Thursday, the 26th, or Friday, 21 the 27th? How do you feel, Larry? 22 MR. WHITTINGTON: Third week is no 23 problem. Third week, fourth week. 24 MS. BRACKETT: All right. Then do you 25 want to make a comment regarding when we meet again? 0116 1 MR. BRESNEN: You need a committee chair. 2 I think Marilyn was the committee chair of that. 3 MR. WHITTINGTON: I will do it. 4 MR. BRESNEN: If y'all were talking in 5 January, my schedule is very flexible. 6 MR. WHITTINGTON: I will be the chair. 7 MR. BRESNEN: For the record, the 19th is 8 okay. 9 MR. ATKINS: For the record, Larry 10 Whittington indicated that he would be the chair of this 11 working group to replace Marilyn Matthews. 12 MS. BRACKETT: Thank you, Larry. Well, 13 let's set this meeting for the 26th, Thursday, the 26th 14 of February. 15 All right. I believe that we have gotten 16 all of the items that require action completed. And 17 there are some things we were unable to do. Yeah. And 18 they will just be carried over. And on your agenda, 19 that includes item number 9, 12, 13, 14, and 16. 20 Fourteen was public comment. Sixteen is adjournment. 21 So really, we did quite well. Number 9, 12, and 13 to 22 carry over. And if you have suggestions for agenda 23 items, please contact the bingo division, the lottery 24 commission, contact Billy's office. 25 MR. SANDERSON: We would like to have 0117 1 those by February 5th, if at all possible. 2 MS. BRACKETT: By February 5th, the 3 desired time to get an item on the agenda. All right. 4 Thank you for coming, and a lot of thanks to the public. 5 We really benefit from the public attending. And we 6 really weren't aware that we would be shorthanded today. 7 So anyway, thank you. Appreciate it. And the meeting 8 is adjourned at 1:08 p.m. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0118 1 REPORTER'S CERTIFICATION 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, MICHELLE M. ROBERTSON, Certified Shorthand 5 Reporter for the State of Texas, do hereby certify that 6 that the above-captioned matter came on for hearing 7 before the TEXAS LOTTERY COMMISSION BINGO ADVISORY BOARD 8 as hereinafter set out, that I did, in shorthand, report 9 said proceedings, and that the above and foregoing 10 typewritten pages contain a full, true, and correct 11 computer-aided transcription of my shorthand notes 12 taken on said occasion. 13 Witness my hand on this the 9th day of 14 December, 2003. 15 16 17 18 _______________________________ Michelle M. Robertson, CSR, RPR 19 Texas CSR 4268 Expiration: 12/31/2005 20 Wright Watson STEN-TEL, No. 225 1801 N. Lamar, Mezzanine Level 21 Austin, Texas 78701 Telephone: (512)474-4363 22 Facsimile: (512)474-8802 23 24 Job No. 031204MMR 25