0001 1 2 3 4 *************************************************** 5 BINGO ADVISORY COMMITTEE 6 MEETING 7 8 AUGUST 21, 2003 9 *************************************************** 10 11 12 13 14 15 16 17 18 BE IT REMEMBERED that the BINGO ADVISORY 19 COMMITTEE meeting was held on the 21ST of AUGUST, 20 2003, from 10:00 a.m. to 12:18 p.m. and 1:05 p.m. 21 to 4:30 p.m., before Connie Jo Ramirez, RPR, CSR in 22 and for the State of Texas, reported by machine 23 shorthand, at the Offices of the Texas Lottery 24 Commission, 611 East Sixth Street, Austin, Texas, 25 whereupon the following proceedings were had: 0002 1 APPEARANCES 2 Ms. Virginia Brackett, Chair 3 Ms. Suzanne Taylor, Vice-Chair 4 Mr. Roy Gabrillo, Auditor 5 Mr. Billy Atkins, Director Ms. Terry Shankle, Manager 6 Ms. Norma Quezada, Audit Manager Mr. Philip D. Sanderson, Director 7 8 Members: 9 Mr. Daniel Moore Mr. Larry Whittington 10 Ms. Patricia Greenfield Ms. Marilyn Matthews 11 Mr. Mario Manio Mr. Pete Pavlovsky 12 Mr. John "Jack" Dougherty 13 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 INDEX 2 Appearances...................................... 2 3 4 AGENDA ITEMS 5 Item Number 1................................. 4 Item Number 2................................. 4 6 Item Number 3................................. 4 Item Number 4................................. 221 7 Item Number 5................................. 221 Item Number 6................................. 221 8 Item Number 7................................. 245 Item Number 8................................. 214 9 Item Number 9................................. 246 Item Number 10................................ 257 10 Item Number 11................................ 254 Item Number 12................................ 218 11 Item Number 13................................ 254 Item Number 14................................ 254 12 Item Number 15................................ 256 13 Reporter's Certificate........................ 257 14 15 16 17 18 19 20 21 22 23 24 25 0004 1 AUGUST 21, 2003 2 3 CHAIR BRACKETT: Good morning, it's 4 shortly after ten and we will call the meeting to 5 order. There's some people here, I'd like to 6 recognize, that are here. Commissioner Cox, there 7 he is. 8 COMMISSIONER COX: Yes, ma'am. 9 CHAIR BRACKETT: Thank you, 10 Commissioner. I was looking over there for you, 11 it's the last place I saw you. And also the head 12 of the Texas Lottery Commission is here, Reagan 13 Greer. And his assistant, who we've seen from time 14 to time, so we appreciate you being here. 15 Have all of you had a chance to read 16 the minutes? Are you ready to correct or approve 17 them? All right. Then the minutes are approved as 18 printed and mailed. 19 On Item number three: Report, 20 possible discussion and/or action on the 78th 21 Legislature, Regular Session on implementation of 22 legislation and new rules and/or amendments to 23 existing rules, including recommendations by 24 subcommittees on unit accounting, advisory opinion, 25 bonds or other security, bingo reports, use of gift 0005 1 certificates, distribution of proceeds for 2 charitable purposes, and registry of workers and 3 licensing issues. 4 MR. ATKINS: And I assume you're 5 calling on me? 6 CHAIR BRACKETT: Yes. Billy Atkins 7 will begin the discussion on that. 8 MR. ATKINS: Madam Chair, the 9 majority of the items under Item three, as you 10 know, represent work products from the 11 subcommittees that were appointed at the last BAC 12 meeting to address some of the different aspects of 13 House Bill 2519 which was passed during the 78th 14 Legislature. 15 There are a total of six different 16 proposals under this agenda item, and you'll notice 17 for just kind of housekeeping purposes, for your 18 benefit, you'll notice that those items are 19 separated by a gold divider while all other agenda 20 items are separated by a blue divider. 21 One item that is noted under this 22 agenda item is proposed rules on licensing issues, 23 and it's my understanding that this subcommittee 24 hasn't finalized their recommendation, so there's 25 something in the note -- there's nothing in the 0006 1 notebook under that item and it will be considered 2 at the next meeting. 3 Additionally, there are two existing 4 rules that have been proposed for amendment to 5 House Bill 2519, and one proposed new rule that 6 didn't have a subcommittee working on it but staff 7 will be available at this meeting to lay those out 8 and explain those to you. 9 And it was going to be my suggestion 10 that after kind of these introductory remarks, that 11 the Chair just go through and call on the 12 subcommittee chairs and the staff members to lay 13 out the products that they've been working on, the 14 proposals that they have before you today and 15 provide explanations and answering the questions 16 that the committee may have. 17 I do think, due to certain upcoming 18 deadlines, et cetera, that we'd recommend, in 19 general, that the advisory committee consider 20 moving forward on these items, giving them to the 21 commission so that they can be proposed for 22 publication in the Texas Register and get the 23 formal rule-making process started so that we can 24 move forward on the implementation of these 25 different provisions. 0007 1 And that, Madam Chair, is pretty much 2 the opening remarks that I had and I'd defer back 3 to you to call on the subcommittee chairs. 4 CHAIR BRACKETT: Okay. Marilyn 5 Matthews will be reporting on the unit accounting 6 rule by subcommittee. 7 MS. MATTHEWS: Well, I'd like to 8 thank everyone on the subcommittee for all their 9 work. We met five times and it's difficult to 10 start with nothing and form these, and I'd like to 11 commend Roy for all his work. 12 We would like the BAC to review this 13 rule and see if there's any changes that need to be 14 made, and, if not, we'd like to recommend that it 15 be presented to the commissioners. 16 CHAIR BRACKETT: Is there any 17 discussion from the advisory committee members at 18 this point? 19 MR. MANIO: I have some questions 20 about this rule. On page 1 of mine, line number 8, 21 and we have shown three options in here, the unit 22 manager, designated agent or trust agreement, and 23 my understanding is that the trust agreement is 24 not an option. It is mandatory under H -- House 25 Bill 2519. Unit manager or designated agent, those 0008 1 are options available to the unit. 2 MR. GABRILLO: Let me address that. 3 Roy Gabrillo, G-a-b-r-i-l-l-o, Auditor, Texas 4 Lottery Commission. 5 The trust agreement is an option. 6 The unit agreement is a requirement. There's a 7 difference between the unit agreement, the unit 8 accounting agreement, and the trust agreement. 9 The unit accounting agreement, every 10 -- every or -- every unit has to have an agreement 11 that spells out how they're going to share the 12 revenue and expenses. 13 The trust agreement is where the 14 organizations that are part of the unit decide 15 which organization is going to be the trustee and 16 is going to be responsible for the reporting, the 17 record-keeping, or access to records and inventory, 18 and things like that. So that's the distinction. 19 One is the unit accounting agreement 20 and the other one is a trustee agreement, mainly 21 one of the organizations as a trustee for the unit. 22 MR. MANIO: Okay, okay. Thanks for 23 the clarification, Roy. I have another question. 24 Page 3 of 5, line number 2: A licensed authorized 25 organization that becomes a member of a unit must 0009 1 maintain a written inventory of all bingo supplies 2 and equipment on hand on the effective date of 3 membership in the unit. 4 And then if you go down on the same 5 page, line number 14: All inventory records must 6 be maintained with both units and the licensed 7 authorized organization's records for a period of 8 four years. So there will be duplication of 9 records in here. 10 MR. GABRILLO: There will be 11 duplication if the unit never changes. If there's 12 additions, in other words, where an organization, 13 because as part of the unit leaves, the unit -- the 14 unit's going to have some kind of record as to what 15 inventory they started with, even though a 16 composition has changed, they still need to 17 maintain an inventory of what they had on hand when 18 the unit was first formed and when it was made up 19 of say A, B, C, you know, A, B, C charities, and 20 now it's made up of BCD charities. So that's why 21 they have to -- as long as we have duplication only 22 if the unit never changes. 23 But for tracking purposes or 24 reporting purposes, they're going to have to 25 maintain an inventory of what they had on hand when 0010 1 the unit was formed because of the possibility of 2 changes within the unit. 3 MR. MANIO: Well, I guess I'm failing 4 to understand because -- 5 MR. GABRILLO: And the other thing, 6 excuse me, I'm sorry. The other thing is, also, 7 the organization that happens to leave a unit and 8 is out on their own, if and when we do audit their 9 records, we'll need to see what inventory they had, 10 that they had transferred to the unit when they 11 joined the unit, and also have to have an inventory 12 of what they -- what was returned to them when they 13 left the unit. 14 MR. MANIO: Okay. So what you're 15 saying is, as long as the unit becomes -- it stays 16 intact, there's no need to keep duplicating 17 records? 18 MR. GABRILLO: Well, they're going to 19 have to keep the records anyway. 20 MR. MANIO: Well, what I'm saying 21 is, one set of records. 22 MR. GABRILLO: Well, it's going to 23 have to be two because the organization -- because 24 we don't know the possi- -- there is that 25 possibility that the new -- the organization could 0011 1 leave the unit. 2 See, we don't know, you know, in that 3 four-year period if the unit's going to stay the 4 same or is it going to change. There is a 5 possibility of the changing, of organizations 6 leaving, so that's why -- that's why if it doesn't 7 change, yeah, there is duplication of records. If 8 it does -- if it does change, it's, you know, the 9 unit will have records, the organization will have 10 records of inventory. 11 MR. MANIO: Right. Because -- 12 MR. GABRILLO: And, I mean, I see 13 what you're saying, it is duplication but it has to 14 be that way just for accuracy of reporting. And, 15 again, when it comes to an audit of the unit, an 16 audit of the organization after it leaves the unit. 17 MR. MANIO: For example, there are 18 five organizations in one unit. What you're saying 19 is -- organization in here will help maintain the 20 record aside from the one that's maintained for the 21 whole unit. 22 MR. GABRILLO: Right. In other 23 words, what they'll -- and probably the best way to 24 do that is, each organization take an inventory of 25 what they're transferring to the unit and just give 0012 1 a copy of it to the unit manager, designated agent, 2 or trustee organization, for that -- for 3 maintenance with the other records, that way if one 4 of them does leave, or two of them leave, whatever, 5 they've got their own record of the inventory of 6 what they're transferring. 7 And, again, they're going to have to 8 take an inventory of what was transferred back to 9 them after they left the unit and the unit's going 10 to have to maintain that record, too, because, you 11 know, if we audit the organization after it leaves 12 the unit and we order -- and we audit the unit 13 itself, we're going to need to know what the 14 inventory levels were at any particular point in 15 time and also if -- during the change, if there was 16 a change in the unit. 17 MR. MANIO: Yeah, I can understand 18 the rationale behind, you know, duplicate records 19 if there is a break-up in the unit, but if there is 20 no break-up, I mean, it's just a duplication of 21 record-keeping effort that's an unnecessary expense 22 because the -- one of the main benefits of the unit 23 accounting is to save -- save money for the 24 organizations. 25 MR. GABRILLO: Well, and you're 0013 1 right, and -- but, again, I think the record 2 itself, you know, it's just -- it could be a xerox 3 copy that they provide to -- that the organization 4 provides to the unit itself. I don't think it's 5 going to take any additional cost or expense just 6 to maintain that one -- that one record. 7 MR. MANIO: There's one record for, 8 let's say, five organizations, and that's a record 9 that's -- that's dynamic, when inventory comes in, 10 there's a change in the record. They use parts of 11 the inventory, there's a change in the 12 record-keeping. So it's not just one page, really. 13 What I'm saying is, in case there's a 14 break-up of the unit, then would it not be the time 15 to get duplicate records, the inventory for the 16 organization that's going away rather than oblige 17 them to keep a record, which is a duplicate of the 18 unit on the records? 19 MR. GABRILLO: Well, again, they're 20 going to have to keep an initial record of that 21 inventory, of inventory that was transferred to the 22 unit if it was transferred, because it could be too 23 that they decided -- the organization may decide, 24 look, we're going to start fresh, we're going to 25 dispose of all this inventory and let the unit 0014 1 purchase, but there has to be a record of it. 2 There has to be a record of what happened to that 3 inventory. Was it transferred or was it disposed 4 of? 5 So, again, like you said, it does 6 seem like duplication but I think it's a necessity 7 because, again, if an organization leaves the unit, 8 we need to know what they transferred and how much, 9 and also what they took back after they left the 10 unit, if they got any inventory back. 11 MR. MANIO: Right. Well, I think 12 that's what I'm proposing is, okay, just maintain 13 one record. If an organization is leaving, then 14 get duplicate records of, you know, from the 15 central file-keeping upon -- when they leave. 16 MR. GABRILLO: Okay. I mean, that's 17 fine. We can take that -- I'll take that into 18 consideration. 19 MR. MANIO: Just to save on, you 20 know, some time and some paper. 21 MR. GABRILLO: Okay. 22 MR. WHITTINGTON: Tell you what, 23 could I ask a question? If I got an organization 24 that comes into unit accounting and they got double 25 inventory compared to another organization, If I 0015 1 put my inventory in double and they put in single, 2 I think that -- that when they pull out, they 3 should get double inventory back at the time they 4 pull out. 5 MR. GABRILLO: Right. And, again, 6 that's something that's going to have to be covered 7 in the unit accounting agreement as to how the 8 disposition of the inventory and how the 9 disposition of any funds that are in the unit 10 accounting bingo account, how those funds will be 11 disbursed. 12 So, I mean, that's going to be a 13 decision that's going to be up to each individual 14 unit as to how the disposition of any inventory 15 funds when an organization decides to pull out of a 16 unit. 17 MR. WHITTINGTON: Well, that's just 18 to -- 19 MR. GABRILLO: I mean, and, again, I 20 mean, it makes sense, but, again, that's going to 21 have to be something that's going to have to be in 22 the unit accounting agreement. 23 MR. WHITTINGTON: Well, you know, 24 that's just to confirm that a record should be 25 kept -- 0016 1 MR. GABRILLO: Oh, yeah. 2 MR. WHITTINGTON: -- at the beginning 3 so -- 4 MR. GABRILLO: Yes. 5 MR. WHITTINGTON: -- we can have his 6 record available if they pull out -- 7 MR. GABRILLO: Exactly. 8 MR. WHITTINGTON: -- to get the 9 inventory back as well as if they don't have enough 10 inventory to get the inventory back they put in, 11 there should be some type of reconciliation of the 12 other charities to refund them for their -- 13 MR. GABRILLO: Right. And, again -- 14 and, yeah, that's something that's going to have to 15 be addressed in the agreement. 16 MR. MANIO: I have one more question. 17 On page 405, line number 11: A licensed authorized 18 organization that is part of a unit and is the 19 holder of a commercial lessor license shall deposit 20 all rental receipts in the unit's bingo accounts. 21 And I guess I'm trying to understand 22 why we want to make up that requirement instead of 23 putting the rental income in the organizations own 24 the bingo account instead of the unit. 25 MR. GABRILLO: Well, one of the 0017 1 things that we discussed when we first -- one of 2 the first things we discussed when the subcommittee 3 met, I brought up the fact of would the 4 organization still maintain their bingo accounts, 5 do you still want -- and the consensus of the 6 committee was that there was no point in the 7 organizations maintaining their own bingo account. 8 I countered with -- my 9 counter-question was, what if an organization 10 leaves a unit. I said, what are they going to do 11 with those funds that they receive after they leave 12 the unit. And a couple of -- a couple of the 13 members said, well, all -- you know, they'll just 14 have to open up a brand new bingo account. It 15 doesn't take anything to open up a new account. 16 So they will not have a bingo account 17 to deposit those funds because all of it's going to 18 go into the unit. It's going to be one account. 19 Okay? 20 And, also, Section 2001.454(a) of the 21 Bingo Enabling Act states that a licensed 22 authorized organization shall devote to a 23 charitable purpose its net proceeds of bingo and 24 any rental of premises. 25 So the disbursements of charitable 0018 1 purposes, the bingo funds are going to be coming 2 from the bingo account, so that's why those 3 receipts, the rental receipts have to be put into 4 the unit bingo account. 5 MR. MANIO: Right. But there is one 6 exception to that, Roy, and that is if organization 7 is a 501(c)(3) -- well, I'm sorry. I'm -- I 8 withdraw the comment for that. 9 MR. GABRILLO: Okay. So that was the 10 reasoning for those funds, the rental receipts 11 being deposited into the unit account. 12 And, also, again, the first 13 subcommittee meeting that we had, the consensus was 14 that there was no point in the organizations 15 maintaining a bingo account if it wasn't going to 16 be receiving any funds. It's all going to be put 17 into the unit account. 18 MS. GREENFIELD: Excuse me. Can we 19 make it to where they're able to do that if they 20 want to, if they have a commercial lessor license 21 and you give the charity the option of whether they 22 want to have a bingo account where they just put 23 the rental receipts, or if they want to put it in 24 unit accounting, instead of requiring it go in 25 there? 0019 1 MR. GABRILLO: I don't think that 2 2519, because, again, 2519 states that all the 3 funds, all deposits of bingo must be deposited into 4 the unit account. Rental receipts are part of 5 conducting bingo because the conductor lessor is 6 collecting rent from the organizations to conduct 7 their bingo so that's -- that's considered bingo 8 receipts. 9 MS. GREENFIELD: I'm looking at two 10 separate licenses, you've got your conductor 11 license and you've got your commercial lessor 12 license, and, to me, it didn't make sense to put 13 the rent in with the conductor license. And I 14 think they should have a choice, whether they want 15 to put it in there or whether they should have 16 their own bingo checking account. And when new 17 charities come into the unit accounting, they're 18 already going to have a bingo checking account 19 anyway. 20 MR. GABRILLO: Right. 21 MS. GREENFIELD: You know, and the 22 ones that are already in existence just keep their 23 bingo checking account and then start putting their 24 -- their daily cash report receipts in. 25 MR. GABRILLO: And then those funds 0020 1 that they receive from rental receipts, they'll do 2 what with that? 3 They'll have to disburse them for 4 charity. 5 MS. GREENFIELD: Yeah, they'll have 6 to disburse them for charity but it'll be up to 7 just that one charity's discretion on why they do 8 it rather than, you know, having five other members 9 that are part of that checking account. 10 MR. GABRILLO: Okay. Well, I can -- 11 MS. GREENFIELD: I think the option 12 -- they should have the option to be able to do 13 that. 14 MR. GABRILLO: Yeah, I guess we can 15 consider that. 16 MR. MOORE: Roy, this is Danny. I 17 think we talked about this, this was one of the 18 hotter topics when we talked. And, Marilyn, I 19 don't think we were totally sold on the one 20 account. I mean, the rest of the members, David 21 was involved, and I'm just saying that that talk, 22 we didn't really clean that up. We kind of ran out 23 of time more than anything so that's -- 24 MR. GABRILLO: I mean, and that's -- 25 I mean, sure -- 0021 1 MR. MOORE: -- reflecting -- 2 MR. GABRILLO: -- that's an option 3 that we can consider if it's, you know, make the -- 4 make the exception for conductor lessor. 5 MR. MANIO: The other point is that 6 the -- even if several organizations form a unit 7 and they're required by 2519 to open and then 8 pay in one big account, that the 2519 is silent on 9 what should be done with the old or the individual 10 bingo account, they can -- I mean, they don't have 11 to close it, they can -- 12 MR. GABRILLO: Well, and that's 13 right. And like you said, that's why I brought 14 that up initially, was what's going to happen to 15 those bingo accounts, are they going to maintain 16 them or are they going to go ahead and close them. 17 And like I said, what I heard was that the, you 18 know, that there'll be no point in keeping those 19 accounts open if they were not going to be 20 receiving any funds. 21 But, again, the conductor lessor 22 issue came up at a later date; it didn't come up 23 initially. 24 MS. TAYLOR: When the funds are being 25 disbursed from the unit account, they would be 0022 1 disbursed at the end of the quarter so that it 2 would show up on the unit's quarterly report. If 3 they're disbursed into their bingo account of the 4 organizations, does that count as disbursed because 5 in fact they're backed with bingo account and not 6 disbursed with the organization. 7 MR. GABRILLO: It's -- no, because of 8 the fact that that -- just disbursing into the 9 bingo account is not considered a charitable 10 distribution. 11 MS. TAYLOR: I mean, I -- I can see 12 the problem with having more than one bingo account 13 for that reason. 14 But I wanted to add my two cents to 15 Mario's. He's absolutely right about the 16 inventory, inventory changes on every time bingo is 17 conducted, the inventory would change. 18 MR. GABRILLO: But they would only 19 have to take it one time. They would take it 20 initially when the unit is formed. They have to 21 take an inventory, each organization would have to 22 take an inventory of what they had on hand, and 23 either, like I said, transfer it to the unit, to 24 start with, or, again, if the unit decides that, 25 well, no, we'll just start fresh, then we need to 0023 1 have a record as to what was -- if they decide to 2 dispose of it, either by sending it back to the 3 distributor for credit or having it destroyed. 4 MS. TAYLOR: Well, I -- I understand 5 that part. 6 MR. GABRILLO: See, but it's -- 7 that's what I'm saying, it's a one-time thing. 8 We're not saying that they need to take an 9 inventory -- 10 MS. TAYLOR: Continuous. 11 MR. GABRILLO: Not for -- not 12 initially. 13 MS. TAYLOR: Okay. So what you're 14 saying here is, this is an initial inventory only 15 that each organization maintains, an initial 16 inventory of what they provide -- what they gave 17 over to the unit? 18 MR. GABRILLO: Exactly. And then the 19 unit itself would have to maintain its own 20 inventory records. 21 MS. TAYLOR: Well, I'm reading it the 22 same way Mario did, which when I was reading it, it 23 was the same thing. A perpetual inventory that has 24 to be -- every single organization has to have, so 25 that's -- I'm -- I'm on the same page with what 0024 1 your understanding is. 2 MR. MANIO: Yeah, I think that's my 3 interpretation -- 4 MS. TAYLOR: That sounds fine then. 5 That's -- 6 MS. WILKOV: Just a moment. You need 7 to speak one at a time because we have a court 8 reporter here. 9 MR. MANIO: I'm sorry. 10 MS. TAYLOR: I don't -- I don't have 11 a problem with that, if that's what you're saying, 12 that you just stick an inventory of what you're 13 providing into the unit, that sounds great. 14 MR. GABRILLO: Right, because -- and 15 I don't know, it may be that (a) needs -- 5(a) 16 needs to be a little bit more clearer but it does 17 say that a written inventory of all bingo supplies 18 and equipment on hand on the effective date of 19 membership in the unit. 20 MR. MANIO: And that's true, that's 21 the beginning inventory, but if you go down to line 22 number 14, it doesn't say "beginning." It's "All 23 inventory records." So any withdrawal or new 24 deliveries. 25 MR. GABRILLO: Okay. I don't know, 0025 1 maybe I'm misunderstanding you but I thought -- 2 well, I mean, if you have some suggestive language 3 to kind of clarify that, but like I say 5(a) is 4 addressing the initial inventory. 5 MR. MANIO: Right, and that's not a 6 problem, just, you know, that's a one-time deal. 7 MS. MATTHEWS: Maybe, Roy, we need to 8 add "initial" somewhere in that paragraph five, 9 line five. 10 MR. GABRILLO: Okay. 11 MS. MATTHEWS: And then 14, I think 12 is a little unclear. It's saying all inventory 13 records must be maintained with both units and the 14 licensed authorized organization's records. 15 What does all "inventory records" 16 mean? 17 MR. GABRILLO: Okay. 18 MS. MATTHEWS: Daily inventories? 19 MR. GABRILLO: Well, as far as the 20 unit, they'll have to maintain because it's going 21 to apply the rule 554, sorry, 558, the rule that 22 talks about maintaining perpetual inventory, that 23 -- they're going to have to abide by that, too. In 24 other words, the unit's going to have to maintain 25 a perpetual inventory for the unit. Okay? 0026 1 MS. MATTHEWS: Right. 2 MR. GABRILLO: Not for each 3 individual organization. Now, what this is 4 addressing is, any inventory changes as far as to 5 the unit, regarding the unit, again, the initial 6 inventory that the -- and any changes if units 7 withdrew, any organization withdrew from the unit, 8 the inventory that was transferred to them, that 9 has to be accounted for. 10 And if you bring in a newunit -- a 11 new organization, the inventory -- if they brought 12 any inventory into the unit, that would have to be 13 maintained by the unit and also by the licensed 14 authorized organization as to what they brought 15 into the unit so -- 16 But the only other thing I can say is 17 on (e), which is on line 14: All inventory 18 records, as far as, you know, addressing the units, 19 talk about that they have to maintain, first of 20 all, perpetual inventory and then any inventory 21 changes due to -- 22 MS. MATTHEWS: Withdrawals. 23 MR. GABRILLO: -- changes in the 24 unit. 25 MS. MATTHEWS: Okay. Maybe we should 0027 1 clarify that line 14. 2 MR. SANDERSON: Phil Sanderson, 3 Assistant Director of Charitable Bingo Operations. 4 Line 14, paragraph (e), is basically 5 saying that inventory records need to be maintained 6 for four years, and I don't think it's saying that 7 duplicate records are to be maintained by both 8 organizations and the unit. It refers to A, B, C 9 and D above, that when the unit's formed or a 10 member becomes -- an organization becomes a member 11 of the organization -- of the unit, then they take 12 an inventory record, both keep a copy of that: The 13 unit and the organization. 14 If the unit loses an organization, a 15 withdrawal, if there's any inventory transferred to 16 the organization from the unit, they both keep a 17 copy of that. 18 Day-to-day perpetual inventories are 19 kept by the unit for four years. So it's not 20 duplicate records for both organizations and the 21 unit, it's just stating that inventory records are 22 to be maintained for four years and the unit keeps 23 what they're required to keep for four years, the 24 organization keeps what they're required to keep 25 for four years. 0028 1 MR. MANIO: Okay. So I guess my 2 problem is interpretation, interpreting the 3 language in the rule, because if you put it that 4 way -- 5 MS. GREENFIELD: If we're having 6 trouble understanding it, then the charities out 7 there are going to have trouble and they're going 8 to be calling wanting clarification, so if we could 9 just maybe state it in such a way that -- 10 MR. MANIO: But it's not unusual for 11 me to misunderstand because English is my second 12 language. 13 MR. ATKINS: We can, if there is 14 suggested language that anyone has, they can 15 provide that to Phil or to Roy or to the 16 subcommittee and they can, you know, Mario, if 17 there's something that you think would make it 18 clearer, or anyone else, they can provide that. 19 MR. WHITTINGTON: And Phil, could I 20 ask a question? But disbursements are made out 21 quarterly of the parties you say to the 22 organizations, in what form is it made out. Is it 23 a check going to the organization they got to put 24 somewhere, do they go to the bank and cash it? Do 25 they put into an account? That's what I'm trying 0029 1 to understand, on that part. 2 MR. SANDERSON: I believe the 3 charitable distribution rule takes care of some of 4 the -- will take care of that, how a unit disburses 5 proceeds. 6 MR. WHITTINGTON: What I'm getting 7 back to charity keeping their account, basically -- 8 MR. SANDERSON: If -- 9 MR. WHITTINGTON: -- because I would 10 want an account if I'm getting a check to put in 11 from a organization, if I'm getting a check from 12 the unit accounting conductor, or whatever, or 13 lessor or whatever I'm getting it from, I would 14 want a account to put that in. 15 And I really think they should keep a 16 checking account, that they got a checking account 17 for that purpose only so I can know exactly what I 18 did at the end of twelve months so I can have 19 everything I need for the IRS to deal with that on 20 that basis. 21 MS. TAYLOR: I think the problem is 22 they're keeping another checking account and it's 23 another bingo account that has to be reported on 24 the unit accounting also. 25 Looking at it, I don't see how a unit 0030 1 accounting can work if everybody, in addition to 2 the unit account, has another bingo checking 3 account. You see? 4 I mean, I -- I can't understand it 5 myself how the unit manager is going to handle 6 that. How the Lottery Commission is going to want 7 to handle that because that's another bingo bank 8 account, so I think -- I mean, I understand what 9 you're saying but I can foresee lots of problems if 10 the charities have their own bingo -- personal 11 bingo accounts, along with the unit bingo account 12 because that all has to show up somewhere but -- 13 MS. GREENFIELD: But you have a 14 separate -- 15 MS. TAYLOR: General account? 16 MS. GREENFIELD: Well, no, you have 17 a separate -- you have a separate quarterly for 18 rental tax, so I think that the unit -- when I 19 think of the unit, I think of conductor and running 20 the bingo games, so I think that whoever has a 21 conductor in a commercial lessor account, the 22 commercial lessor account should be able to have a 23 separate checking account. Maybe, you know, 24 everybody -- 25 MS. TAYLOR: I agree with that, yeah. 0031 1 I don't have a problem with that but every single 2 charity having another account? 3 MR. WHITTINGTON: Well, I mean, 4 unit account, and I guess is the way I looked at it 5 and I look at unit account in helping every charity 6 get the equal disbursement from each session they 7 might play, that's the main thing and make sure 8 that all the charities are taken care of, not 9 interfering what they have as far as checking 10 account already. I mean, that's the way I looked 11 at it, because they got to stand on their own 12 sooner or later. 13 I mean, each charity is going to have 14 to stand alone at the end of the year anyway. 15 There's got to be something, some kind of way, you 16 know, they can have somewhere to put this money 17 coming from the unit. 18 MR. SANDERSON: Well, and one of the 19 questions that I would have then, probably 20 whenever the unit accounting was being discussed 21 last year, and where had the subcommittees on that, 22 one of the benefits that everybody foreseen with 23 the unit accounting was a better audit process, so 24 if the organizations, five organizations in a hall, 25 we go do an audit today, there's five bingo 0032 1 accounts that we audit. And if they keep that same 2 bingo account and now there's a unit, instead of 3 going down to one financial records to audit, we're 4 auditing six. 5 So that kind of defeats what the 6 original intention was, that they would cut back on 7 our time for doing the audits. We'd go in and hit 8 one account and then be out. 9 MS. GREENFIELD: Well, you're really 10 worried about where the distributions are going, 11 right? You want an account for your distribution? 12 MR. WHITTINGTON: Yeah, I mean, it's 13 not -- the bingo account it'll be audited as one 14 account. 15 MS. GREENFIELD: Well, what if, can't 16 we just have an account that they just put all 17 their distributions in and then they -- I mean, it 18 doesn't have to be a bingo account but it could 19 just be one that they open and that's what they put 20 in, it doesn't that to be the general fund account 21 but -- 22 MR. SANDERSON: But we have to make 23 sure that the money was used for a charitable 24 purpose. 25 MS. GREENFIELD: Yeah, but if you 0033 1 have one account where you're putting all your 2 distributions and that organization is just using 3 that one account for that purpose, it seems like it 4 would be a lot easier for you to do an audit 5 because you've got -- you know exactly where the 6 money is going because it's coming straight out of 7 that one account rather than having to dig through 8 the general fund records and find where, you know, 9 where the money went. Is there anything saying 10 that we can't do that? 11 MR. SANDERSON: Well, 568, or 12 whatever the charitable distribution use of 13 proceeds rule, has got language in there that 14 allows for that -- for you to put money from the 15 unit into a special fund account so that, you know, 16 that rule may cover the question you got about how 17 to disburse the proceeds out of the unit. 18 MR. WHITTINGTON: So based on, and I 19 can deal with the unit accounting -- account and 20 keep my account now for my charity as a special 21 fund account, that's basically what you said? 22 MR. GABRILLO: In the -- in the use 23 of proceeds rule, there is -- there's certain 24 restrictions or limitations as to what that account 25 can be used for. 0034 1 In other words, if it's going to be 2 used as a -- for -- the example that's given in 3 here, if it's a scholarship -- say you have a -- 4 the organization every year gives out scholarships 5 to say high school kids for college. They can use 6 that account as a holding account with the 7 stipulation that, especially if they only make a 8 disbursement once a year, they give out those 9 scholarships once a year, during that year, they 10 can put those funds into the -- into that special 11 account. 12 But, again, they have those -- they 13 have to get, first of all, approval from us to use 14 that account. Because right now, the way it's 15 proposed now, the language that's in there, all the 16 disbursements have to come out of the bingo 17 account. All charitable disbursements have to come 18 out of the bingo account. There's no -- and just 19 moving it from the bingo account to the general 20 fund is not going to be considered a charitable 21 distribution. 22 And, again, one reason behind that is 23 to cut down on, as far as auditing the different 24 accounts where we're just auditing one account, the 25 bingo account. So if all the disbursements are 0035 1 made from the bingo account, that's only one 2 account we have to audit. So, again, that's what's 3 in the rule right now. The language that's in 4 there, that all charitable disbursements have to 5 come out of the bingo account and which that 6 applies to the unit also. 7 MR. WHITTINGTON: Okay. If you're 8 going to audit the unit -- 9 MR. GABRILLO: If we audit the unit 10 -- well it's going to apply to -- 11 MR. WHITTINGTON: Okay, one 12 organization is messed up somewhere in the unit, 13 wouldn't it be easier -- 14 MR. GABRILLO: It's all -- it's all 15 -- all the funds are going to be going in. 16 MR. WHITTINGTON: I understand that. 17 But one -- if y'all look at that one specific 18 organization or -- 19 MR. GABRILLO: When we audit -- when 20 we audit the unit, we're going to audit just the 21 unit. We're going to audit everything that's in 22 -- all the records that relate to the unit, which, 23 yeah, it belongs to the organizations. The 24 organizations are the ones conducting the bingo but 25 we're going to audit the unit, we're not going to 0036 1 audit the individual organizations. 2 And like Phil was saying, it kind of 3 defeats the purpose then if each one of these 4 organizations, for instance, five, if they're all 5 maintaining their own bingo accounts, then we're 6 going to have to audit, not just the unit account, 7 then we got to go back over and look at the 8 organizations, the individual organization's bingo 9 accounts to see how those funds are disbursed for 10 charitable purposes. 11 So this way, if it comes out that the 12 unit -- the organizations that are part of the unit 13 are going to have to direct whoever is responsible 14 for the funds where they want those funds 15 disbursed, for what charitable purpose they want it 16 disbursed. 17 MR. WHITTINGTON: I'm a little 18 confused. You've got five organizations, period, 19 unit, you got all these five -- these organizations 20 together in one unit? 21 MR. GABRILLO: But there's only one 22 account. 23 MR. WHITTINGTON: Only one account. 24 MR. GABRILLO: Right. 25 MR. WHITTINGTON: But, still, that's 0037 1 one charity -- you might look at all these 2 charities, there's still going to be one charity 3 that's probably going to have some discretion, 4 there's going to be one; might be two. But, I 5 mean, but I can see -- I mean, after this money has 6 been disbursed. Okay? 7 MR. GABRILLO: But, again, the 8 unit -- 9 MR. WHITTINGTON: Disbursed 10 where? 11 MR. GABRILLO: It's going to be 12 disbursed directly to their charitable purpose. 13 In other words, the -- I'm a charity 14 that's part of a unit. It's time -- it's getting 15 towards the end of the quarter, I have to disburse 16 so much for charity. Okay? 17 MR. WHITTINGTON: Okay. 18 MR. GABRILLO: I direct whoever the 19 unit manager, the designated agent, the trustee, 20 whoever, to disburse X amount of dollars, say 21 $1,000 to the Boy Scouts. That's how it's going to 22 have to be done because it's going to come out of 23 the unit account. 24 The unit just can't write a check to 25 my bingo account and then I disburse it from there. 0038 1 It's going to have to come directly out of the 2 unit's bingo account if this -- because that's 3 what's in the -- in the new or this revised use 4 proceeds rule. 5 MR. WHITTINGTON: I'm confused. I 6 mean, I'm asking this for a reason because I really 7 don't understand. I'm trying to understand this. 8 I mean, unit is good to make sure all the charities 9 gets the same distribution and we've got to come up 10 with a more simplified way for the distribution, 11 what happens to it once they get this, this 12 distribution is going to be in one account. I got 13 to tell, hey, I want so and so, so and so, I mean, 14 all these checks are going to be coming from this 15 one account -- 16 MR. GABRILLO: Exactly. 17 MR. WHITTINGTON: -- to all these 18 organizations here. 19 MR. GABRILLO: And as Phil mentioned 20 earlier, that was one of the things that -- one of 21 the positives we heard about the unit account, that 22 it would cut down on the number of checks that were 23 written every quarter. Instead of -- instead of 24 five -- a one -- a worker receiving five checks 25 from five charities, this is going to be one check 0039 1 written. 2 MR. WHITTINGTON: Well, I can see it 3 on -- I can see on the utilities. 4 MR. GABRILLO: -- apply to the 5 charitable distribution. 6 MR. WHITTINGTON: And this applies 7 but I can't see it on the distribution for the 8 charities, that's what got me confused. And I can 9 understand the rent, I can understand the -- the 10 bills, the electrical bill, et cetera, the 11 supplies, one check, because I'm using that along 12 with everybody else's possession, which I'm going 13 to take if I'm playing three sessions, I know what 14 I got to get -- to do to make sure I cover three 15 sessions, or playing two sessions a week. Okay? 16 I know my dis -- distribution going 17 to be a lot less than a three session because I'm 18 playing one less session. I know that, so I got to 19 make sure I cover my part of it on the supplies and 20 the distribution part of it. Before it's me, be 21 organization by myself personally, I got to take 22 care of some other stuff compared to number 23 organization two or three or four, so that's what 24 I'm saying, once I get my distribution quality, I 25 want to know where I'm putting this at and I want 0040 1 to use it for my charity. 2 MR. GABRILLO: Oh, but you will be 3 knowing -- you will know when they -- when you tell 4 the -- whoever is responsible for the disbursements 5 of the funds where you want that money directed to 6 for a charitable purpose. 7 MS. TAYLOR: So you've got, let's 8 say, to make it really small numbers here. You 9 make $100 and you've got five charities. Each of 10 the charities is going to get a $20 disbursement. 11 Wouldn't you write out five checks, one to each of 12 the charities participating in their hall, they put 13 it in their general account and then disburse it 14 out for their charitable purpose? 15 MR. GABRILLO: That's the way it 16 would work now. Okay? But with the rule that's 17 being proposed today, the language that's in there 18 is saying that you can no longer do that. You have 19 to write the check directly from bingo to your 20 directed charitable purpose. It can't go into -- 21 it's not going to go into the general fund and then 22 get disbursed from the general fund. It's going to 23 be disbursed directly from the bingo account. 24 MS. TAYLOR: Then what are you going 25 to put down on checks if Virginia's charities have 0041 1 checks cut to, you know, her -- the electric bill 2 and the building fund and to pay for the children's 3 clothes and -- 4 MR. GABRILLO: There is -- there is 5 language in 501 -- in the rule that addresses 6 501(c)(3) organizations that can do that. They can 7 disburse it from their bingo account directly to 8 their general fund. 9 MS. TAYLOR: And then pay their 10 bills? 11 MR. GABRILLO: Yes. 12 MS. TAYLOR: Okay. 13 MR. GABRILLO: It applies to 14 501(c)(3). 15 CHAIR BRACKETT: Okay. We've spent 16 like 45 minutes on this so we haven't heard from 17 the public so I'd like to hear from the public now. 18 And the first -- and I think other 19 questions that you have will be answered through 20 the response to the public speaking. 21 The first form, Witness Affirmation 22 Form I received was from Ronnie Hunter. Is -- 23 yeah, there you are. 24 RONNIE HUNTER: Good morning. My 25 name is Ronnie Hunter, I represent the American 0042 1 Legion, I'm the Bingo Chairman for the Department 2 of Texas. 3 Just a couple of things. Number one, 4 unit accounting. Why are we doing this? Makes no 5 sense. We already got a can of worms. If we get a 6 audit, it takes them two months to six months to 7 get the paperwork back to you. A unit audit. I 8 don't understand, neither does none of my people 9 there. 10 We had a meeting and nobody 11 understands why we're causing or opening a bigger 12 can of worms than what we have now. 13 Next one is on the distributorship of 14 proceeds for the veterans. It came up at our 15 department meeting -- 16 CHAIR BRACKETT: Okay. We need to 17 just talk about unit accounting right now. 18 RONNIE HUNTER: All right. You 19 didn't want -- everything was under the one thing, 20 I didn't know. 21 CHAIR BRACKETT: I know. It's 22 confusing. 23 RONNIE HUNTER: All right. I'll wait. 24 MS. MATTHEWS: Well, the unit 25 accounting is voluntary, you don't have to do it. 0043 1 I mean, you're not required to be a unit, it's only 2 for those organizations that want to form a unit. 3 If you feel it's going to make a problem, then 4 don't do it. 5 RONNIE HUNTER: To me, it looks like 6 it would make a problem for the bingo commission 7 itself, not just the people. 8 When you start distributing checks 9 from one account, you're distributing for everybody 10 else. I think Suzanne had a deal -- I think she 11 run a bingo hall at Webber bingo, and she tried to 12 do this under different circumstances, and it had 13 to be a pain. I mean, there was no way to keep 14 track of everything and keep it straight, was it? 15 MS. TAYLOR: I think that, 16 truthfully, that the unit accounting for halls that 17 have a very good working relationship could be a 18 good thing. I think disbursing checks to pay 19 everybody's bills that, for whatever use for their 20 charitable purposes out of one unit account will be 21 a disaster so -- 22 RONNIE HUNTER: It'll be a mess. 23 MS. TAYLOR: Yeah. 24 RONNIE HUNTER: In my opinion. 25 CHAIR BRACKETT: Thank you. Okay. 0044 1 David Heinlein. Heinline. 2 DAVID HEINLEIN: David Heinlein. I 3 represent 32 nonprofit charitable conductors. I 4 might make a suggestion here at the beginning, it 5 might be helpful to have comments from those 6 members of the subcommittees before we go to the 7 public, and I am a member of this subcommittee, 8 because we had input that might be helpful to 9 those, you know, before they -- 10 CHAIR BRACKETT: Okay. Thank you. 11 Appreciate that suggestion. 12 DAVID HEINLEIN: I guess I'll start 13 at the beginning. Let me start with the bank 14 account. 15 The reason that we thought it would 16 be good to close your existing bingo bank account 17 and roll everything into just a single unit is for 18 what Roy has stated here, that our goal is to 19 simplify, not make it more harder or more difficult 20 type of an audit. That's one of our goals is to 21 decrease cost, not increase cost. 22 So if we have one single bingo bank 23 account, the audit is simpler. They can come into 24 a hall and audit one bingo bank account. They 25 don't have to go to five different charity 0045 1 representatives. They go to the designated agent 2 or the unit manager and receive all the records and 3 will do a simple audit on one account and makes it 4 very simple. 5 It came up later before we really had 6 time to do much discussing on the fact, that in the 7 case of a conductor who also had a commercial 8 license to put their rental receipts into this unit 9 bingo bank account, and we did disagree on that, 10 and Roy and I, I think agree to disagree on this. 11 Is that right, Roy? 12 MR. GABRILLO: Yes, sir. 13 DAVID HEINLEIN: Because if you have 14 to do that, then, obviously, the commercial lessor 15 will not allow himself to become a part of the 16 unit, which he might. 17 I have a situation like that that we 18 had discussed even before this came up and I've 19 about decided that commercial lessor would remain 20 independent at that hall and all the other 21 charities could form a unit, but I don't know why 22 it wouldn't still work for him to be a part of the 23 unit if he could then maintain a separate bingo 24 bank account. 25 I think that ought to be an 0046 1 exception, then, in this particular rule, that all 2 of the money would go -- you would close all the 3 bingo bank accounts of those people that are not a 4 commercial lessor, but in the case of a charitable 5 conductor lessor, it will allow him to keep -- 6 maintain an account to simply put his rental 7 receipts. That would make sense because he has a 8 lot of expenses that are not related to the unit 9 that they're paying rent to him for so that he can 10 cover those expenses and he would be able to pay 11 those expenses out of that account. 12 As is listed in the next item there, 13 it says that he must also remit the taxes on the 14 rental income. 15 Well, where would he remit those 16 taxes from if he couldn't remit it from the income 17 that he received from the rental receipts so 18 there's -- and there's many other expense items 19 that come as a part of really that facility to 20 these charitable conductors. 21 It makes no sense for him to put that 22 money into the single unit bank account and he's 23 not going to do that so it's just by writing it 24 like that, it just means that we will keep that 25 charitable conductor, the commercial lessor 0047 1 separate from the unit. 2 I'm wondering if on page 2, line 15: 3 Upon notification from the commission that the 4 licensed authorized organizations are qualified to 5 become a member of a unit, the person described in 6 Section (a) (1) (D), (E) or (F), of this rule is 7 qualified and a unit accounting agreement has been 8 executed, the unit may begin operations on the date 9 proposed. 10 My question is, I understand that 11 we've requested notifi -- notified the commission 12 we intend to do this. We -- that was the first 13 thing that we decided we had to do. How did we 14 start a unit? 15 Well, we said, we ought to send a 16 notice of intent to the Commission that we're 17 intending on doing this, and we set out the 18 perimeters of that information which we ought to 19 give to them, and that's all been carefully done in 20 the first page here as to what we ought to do in 21 that notice of intent. 22 Now, what do they do with that 23 information? Well, we have to qualify as a member 24 of the unit by having -- and we said we want to be 25 sure that there were no unpaid renter's fees, or in 0048 1 the case of a commercial lessor, lessor tax. So 2 that would be reasonable and that's an identifiable 3 qualification that's required to be a member. 4 You submit all the information that's 5 required, that's listed there, and you pay your 6 taxes and you're done. 7 And so the notification process, it 8 would seem, then, would be a very simple process 9 and within a few days' time, you could expect to 10 have approval. 11 But then it says, "And a unit 12 accounting agreement has been executed." Now, we 13 did not cover that part of that in our 14 subcommittee. 15 We did suggest at one time that maybe 16 there should be some sort of sample unit agreement. 17 Well, it would seem if that's going to be one of 18 the requirements to have this unit accounting 19 agreement, then it's got to be approved in order to 20 get this notification to proceed, then we better 21 define what the unit accounting agreement is going 22 to be and would that not also include a trust 23 agreement. 24 So I do think we're a little short in 25 that area of definition of what we intend to do so 0049 1 that it's clear to both sides what is going to be 2 required of them in order to get this notification. 3 If we leave it ambiguous, then it 4 might take a year to complete the qualification and 5 notification. And I don't think that was the 6 intent at all. We were intending on doing 7 something that would make the operation move very 8 smoothly, so I think we need to smooth that out. 9 Then on page 4, we did not get to 10 discuss this area either. As I'm sure was the case 11 with other subcommittees, this was a very rushed, 12 rushed time period that we had to work with them 13 and constraints were great. 14 Prior to Monday, August the 11th, we 15 had just a page and two-thirds document and we've 16 ended up with a five-page document, but we didn't 17 actually see that until Monday, the 11th, and then 18 it had to go to press and really didn't have time 19 to, you know, make a lot of comments. So I'd like 20 to defend the subcommittee in that area, that we 21 were rushed and Roy was rushed, so I think that 22 would be why we still have some things that we did 23 not get to discuss. 24 On line 16 of page 4, we did not 25 discuss this one: Disbursments for charitable 0050 1 purposes shall be made directly from the unit's 2 bingo checking account pursuant to Administrative 3 Rule 402.568(c). Is that not supposed to be 598? 4 MS. TAYLOR: Yes. 5 DAVID HEINLEIN: Okay. Well, under 6 598, on page 4, and I'm not trying to comment on 7 that rule, but since there's a reference to it, 8 I'll have to go over to that, on page 4 of that 9 rule, it says: The only licensed authorized 10 organizations that may write a check from the bingo 11 account into their general account or other account 12 is an organization with a 501(c)(3) tax-exempt 13 status, religious society or volunteer fire 14 department, and Roy mentioned that while ago. 15 So I would have to ask the question, 16 would that not then apply to this unit? If those 17 members of the unit are 501(c)(3)'s, religious 18 societies or volunteer fire departments, would it 19 not then follow that the disbursement could be, as 20 Suzanne had recommended in the case of $100 21 disbursements; $25 can go to each of their general 22 funds if they're 501(c)(3)'s and yet -- volunteer 23 fire department or religious society, would that 24 not be the way we can interpret that, Roy? 25 MR. GABRILLO: Roy Gabrillo, Auditor, 0051 1 Lottery Commission. 2 Well, in looking through 2519, 3 there's a section here, in fact, it's going to be 4 2001.435(c): All authorized expenses and 5 distributions of the unit and its member shall be 6 paid from the unit bingo checking account. 7 So that's the other reason that that 8 provision was in there was because of the fact that 9 2519 is requiring the disbursements and/or 10 distributions be paid from the unit's bingo 11 account. Be paid directly from. 12 It could be -- right, this rule, 598, 13 could apply to -- that provision could apply to the 14 unit where they could write it from the unit to the 15 51 -- if it's a 501(c)(3), religious or volunteer -- 16 DAVID HEINLEIN: I think it qualifies 17 them. 18 MR. GABRILLO: Right, they could put 19 it into their general account. Any of the other 20 organizations that are just nonprofit, it wouldn't 21 apply to. 22 DAVID HEINLEIN: Right. That's the 23 way I understand it. 24 One other thing that we talked about 25 in the subcommittee and we've made no headway on 0052 1 doing that in this unit accounting agreement, and 2 that would be to get an advanced ruling from the 3 IRS. We got a little bit of information but we 4 really didn't obtain anything favorable. 5 Would it not be helpful if the 6 Charitable Bingo Division would be able to get an 7 advanced ruling from the IRS? 8 I know it's not your responsibility 9 to do that, but in order for us to be able to 10 collectively do this uniformally across the state, 11 it would seem very helpful if we did apply for an 12 advance ruling from the IRS to be certain that 13 we're not jeopardizing the 501(c) status by 14 entering into this unit. 15 I've gotten differing views from 16 different agents that I've talked with. None of 17 them have given me any flak that it would be a 18 problem as long as -- that's the reason, in our 19 cases, we've decided we'd be putting into a trust 20 agreement because it makes it more legitimate to 21 the IRS eyes than the other methods. So I wonder 22 if it's not beneficial to the industry if we could 23 find some way to fund getting an advance ruling 24 from the IRS. 25 MS. MATTHEWS: Well, I think those 0053 1 take awhile to get and I think they cost money. 2 DAVID HEINLEIN: Yes, they do. 3 MR. ATKINS: And let me address that 4 briefly, David. I think that that's been discussed 5 in the past, and my recollection is at the time, 6 that everybody was kind of the opinion it would be, 7 you know, the organization's responsibility -- 8 DAVID HEINLEIN: Yes. 9 MR. ATKINS: -- to, you know, learn 10 from the IRS what the implication was for the 11 individual organization, or group of organizations 12 was going to be. 13 DAVID HEINLEIN: I agree, but I'm 14 just saying it would be so helpful of you -- 15 CHAIR BRACKETT: You're looking for 16 someone -- yeah, you're looking for someone to take 17 that task on? 18 DAVID HEINLEIN: No. What I'm asking 19 is that there's a sense so that these units might 20 get a sense of the possibility of being approved 21 and once one of the organizations or one of the 22 units might do this and get an advance ruling, we'd 23 have a history then of the IRS having approved it 24 and so that organization spends the 2,000 or 4,000 25 or 5,000, whatever it is that the IRS charges for 0054 1 that, and they've spent -- they've paid the cost 2 for the whole industry then to have that ability to 3 enter into it with confidence knowing that this is 4 what the interpretation of the IRS is. 5 I don't know how we go about doing it 6 from your perspective but it would sure be nice. 7 MR. ATKINS: Yeah, I don't either 8 but, you know, in other words, you say it'd cost 9 anywhere from two- to $4,000, I know that the, you 10 know, bingo won't be -- 11 DAVID HEINLEIN: Yes, sir. Well, 12 that's why I had to -- if you all are able to -- if 13 you have a relation with the IRS in a mode 14 different than the person on the street, you know, 15 you might get a sense that you could advise us as 16 to whether or not we should go in the direction of 17 how to get this advance ruling. 18 There's so many different kinds, it's 19 two or three pages long of how to get advance 20 rulings. It's not an easy task. 21 MS. MATTHEWS: I wonder if an advance 22 ruling is what we need, perhaps it's something 23 lesser that we could get for nothing, you know, 24 advice. 25 DAVID HEINLEIN: I like nothing. 0055 1 That's really what I'm getting at. 2 MR. ATKINS: Don't you all have an 3 IRS representative on this subcommittee or was it 4 on the charitable distribution? 5 MR. GABRILLO: Yeah, it was on the 6 charitable. 7 MR. ATKINS: Okay. 8 MR. GABRILLO: Yeah, it was on 9 charitable. 10 DAVID HEINLEIN: We sure needed one. 11 MS. MATTHEWS: One problem that maybe 12 you know the answer, David, that I've been thinking 13 about a unit accounting apparently the IRS 14 representative said could not have federal 15 identification number, how are we going to file 16 payroll reports without a employer identification 17 number? 18 DAVID HEINLEIN: Well, I think that 19 what they're saying is that you're going to be a 20 nonprofit organization, then that creates other 21 problems, so that's the reason I think we're 22 looking at having to go over trust agreement as 23 being our only options but some others may have 24 some other ideas about that. 25 MS. MATTHEWS: And then you had one 0056 1 more -- 2 DAVID HEINLEIN: But you can form, I 3 mean, you can form an organization and receive an 4 EIM number for purposes of payroll. 5 MS. MATTHEWS: Right. 6 MR. HEINLEIN: You can do that. 7 MS. MATTHEWS: But apparently not the 8 unit. 9 MR. HEINLEIN: Well, then that can be 10 the unit and that's part of your unit agreement. 11 Yeah, you can do that. I mean, I'm not an 12 attorney, gotta be careful, I don't practice law 13 with all these attorneys sitting here. I'll let 14 them speak to that. 15 MR. GABRILLO: Before you go to 16 address your question about, on page 2, line 17, 17 Section F, where you talk about it references a 18 unit accounting agreement has been executed and you 19 were talking about defining it. We can add 20 language in there that references what a unit 21 accounting agreement is, if it's Section 22 2001.431(3) of the act, that's -- so we can put 23 that language -- put that language in there and 24 reference it. 25 DAVID HEINLEIN: Yeah. Sure. 0057 1 MR. GABRILLO: Okay. 2 DAVID HEINLEIN: Any questions for 3 me? 4 CHAIR BRACKETT: Okay. Steve 5 Bresnen, you wanted to speak? 6 MR. BRESNEN: Yes, ma'am. My name is 7 Steve Bresnen and I'm here on behalf of the Bingo 8 Interest Group. I'd like to subscribe to the 9 previous comments on the unit accounting rule that 10 have been made on the subsection (e), where we were 11 looking for that clarification on the maintenance 12 of two sets of inventory records. I gave Phil some 13 language that might sort that out. 14 I'd like to make a few brief 15 comments that I hope will be in addition to those 16 that have already been made. 17 First is, I don't think the intention 18 of unit accounting provisions in the statute, about 19 which I probably know more than anybody, was ever 20 intended to displace the general fund activity of 21 these organizations. 22 We were operating in a environment, 23 the intent of which was to eliminate a bunch of 24 bingo accounts. And seems to me there are not that 25 many charity lessors in existence out there. So if 0058 1 they maintain a separate account to receive the 2 rental income distribution, it would still mean 3 that all the other charities in the state could be 4 part of a unit and all of -- a bunch of their bingo 5 accounts could be eliminated. 6 I do agree that the purpose of a unit 7 accounting list would eliminate a whole bunch of 8 bingo accounts out there but I don't think we ought 9 to let the perfect be the enemy of the good here 10 and we could make substantial change here and 11 substantial improvement if we recognize those kinds 12 of nuances that are raised by that issue. 13 I might also say that one way to 14 address that issue would be to put in your unit 15 accounting agreement that if you're the lessor, 16 your receipts from the unit each month are going to 17 be all of your rental income. So as a practical 18 matter, it seems to me it could all go in there and 19 your rental income could come out of there. I 20 mean, it could be worked out by agreement or it 21 could be worked out by the maintenance of a 22 separate account. So I think there's more than one 23 way to go there. 24 With respect to paying if 25 distributions for charitable purposes out of the 0059 1 unit account, I don't think that that was ever 2 intended. I suppose it could be done under the 3 unit agreement but if we go back to fundamentals, 4 if you look at the definition of unit accounting, 5 it says, it means a method by which charities that 6 are members of the unit account for sharing of 7 revenues, authorized expenses and inventory. 8 That's what unit accounting is. It's things 9 related to the conduct of bingo and I don't think 10 that it was ever intended to take over the general 11 fund activity of all the charities that might want 12 to participate in a unit. 13 And if you do that, there will be no 14 units. I don't think anybody's going to do that. 15 I have been one who has, again, 16 sometimes the private counsel of my -- some of my 17 clients, I've been one that's defended the, as a 18 practical matter, the necessity of the Commission 19 to be able to audit beyond the bingo account 20 because once those funds are distributed, they have 21 to be spent for a charitable purpose and you have 22 to be able to trace those funds. 23 I don't think anybody ever intended 24 that we would end up with one account out of which 25 all charitable expenditures were made. 0060 1 I'm going to have the same comment 2 about the rule on charitable distributions when we 3 get there. 4 A new comment that I'd like to add on 5 the -- I'm trying to look at your version of the 6 rule. I've got an old one here. On page 2, under 7 Subsection B, I've got essentially two comments 8 there. 9 First of all, there's this notion 10 that there's a necessity of qualifying for 11 membership in a unit. There's no such provision 12 in the statute and I think all you have to do to 13 qualify to participate in a unit is to be a 14 licensed authorized organization under Chapter 15 2001.432, it says: Two or more licensed authorized 16 organizations may form an operating unit as 17 provided by this subchapter, and then it goes on to 18 say, executed an agreement, state in the agreement 19 whether you're going to use a unit manager or 20 designated agent. And so those are really the 21 criteria for doing so. 22 Secondly, and this is really my more 23 important point here. It speaks to upon 24 notification from the Commission that you're 25 qualified. That means you all, Billy, are going to 0061 1 have to expend resources in evaluating a 2 qualification and then notifying the people out 3 there. That's, in essence, a licensing function. 4 It's been my position for a long time 5 now that we have excessive state resources which 6 are scarce to begin with, that can be excessive and 7 scarce at the same time dedicated to licensing 8 activities and not enough focus on the auditing 9 activities. 10 And this goes back to my statement of 11 my day in black, but I would consistently focus on 12 the need to address this issue of alleged 13 corruption in the bingo industry. 14 When you divert resources to things 15 like this that are not consistent with the statute 16 and that are unnecessary, it takes money away from 17 pursuing where funds are being spent for fraudulent 18 purpose or somebody's cheating or stealing. 19 And so I would suggest that that be 20 taken out because, number one, the statute sets the 21 qualifications and they have nothing to do with 22 timely filing of anything or delinquency; and 23 number two, take out the part about notification 24 because the statute speaks to notification from the 25 Commission. Take that part out because the statute 0062 1 doesn't speak to it and it's unnecessary. 2 I do think, obviously, that the 3 Commission has to be notified by those forming an 4 accounting unit, that they're going to -- that 5 they're going to operate in this manner. That 6 seems reasonable to me. 7 I think I've spoken to -- oh, and one 8 final thing that relates to this, it's not directly 9 contained in this rule but I think it's got to be 10 addressed along the way and that's going to be the 11 bonding requirements. 12 It's my understanding, and it's a 13 little bit over my head, finance is not my strong 14 suit, but it's my understanding that the way this 15 unit accounting rule meshes with the bonding rule, 16 that no one is ever going to be a unit manager. We 17 won't have that form operating because the bond 18 will be so expensive that nobody can afford it, 19 much less to be a unit manager in multiple settings 20 so we need some attention to that along the way and 21 thank you very much. 22 I want to thank the unit accounting 23 subcommittee that worked so hard on this rule and 24 Roy and others that participated really, really 25 high quality discussion and I was pleased to 0063 1 participate in a couple of those meetings. Thanks. 2 I'll be happy to answer any questions. 3 Let the record reflect that Bresnen 4 was brief today. 5 CHAIR BRACKETT: Well, who's going to 6 define "brief"? Mr. Fenoglio? 7 MR. FENOGLIO: Good morning, Madam 8 Chair, Members. My name is Stephen Fenoglio, I 9 represent over 950 charitable business 10 organizations. 11 I won't repeat the comments of 12 Mr. Bresnen or Mr. Heinlein but I will make a 13 suggestion to cut to the chase on the page 4 of 5, 14 under subparagraph (c): General Provisions, line 15 12, change the word "shall" to "may," and the 16 reason I say that is that the unit agreement, 17 Patricia, may address that the revenues from a 18 charity lessor will not be part of the unit and 19 that's the way -- when I envisioned this, and as 20 most of you all know, Mr. Bresnen and I primarily 21 wrote the early drafts and then negotiated with 22 staff with Billy and Phil Sanderson and others as 23 the target moved in House Bill 2519, and 24 Commissioner Cox was in many of those meetings, but 25 my point was, there may be agreements that will be 0064 1 reached where a charity who acts as a lessor will 2 agree to put those revenues into the unit and there 3 may be other circumstances where that charity 4 lessor has done -- has undertaken certain 5 obligations that it alone is responsible for. 6 For example, it may have signed the 7 lease agreement, and it should be awarded a risk 8 portion, because if the bingo goes away, that 9 charity that's acting as a lessor is standing there 10 holding the bag and it alone. 11 And so with that understanding, I 12 don't envision any lessor that would ever want to 13 unilaterally agree to divvy those proceeds into 14 this as the language is drafted now. It should be 15 made. 16 Under subparagraph (c)(3) page 4 of 17 5, lines 16 and 17, strike it all. This was 18 heavily discussed and contested at the subcommittee 19 meetings, and that is: The disbursements for 20 charitable purposes shall be made directly from the 21 unit's bingo checking account, et cetera. 22 River City Bingo has in effect 23 legally, I might add, operated as a unit agreement 24 from the beginning of inception some eleven years 25 ago, and you all have heard me discuss that. I 0065 1 helped set that up. We have five charities. The 2 largest charity as far as budget is the Family 3 Elder Care that provides services to needy senior 4 citizens. They run a budget, Pete, of about three 5 and a half million dollars a year. The arc of the 6 capital area which I have helped in every way I 7 can, I have a nephew that has Down Syndrome, has 8 about a million dollar budget. 9 The bingo proceeds for those two 10 charities alone is less than 10 percent of their 11 total budget. 12 There is absolutely no way that if 13 they were to join the unit, which they want to do 14 and plan to do, but with that language will never 15 do, because you can't write enough checks out of 16 the unit agreement for those charitable purposes. 17 The reason we created the unit 18 agreement, you got five charities, they're writing 19 between thirty to eighty checks a month, and Larry 20 knows this because he's done effectively the same 21 thing, you're going to cut -- times five, you're 22 going to cut it to thirty to eighty checks, total, 23 so four-fifths of the number of checks of the 24 number of paperwork goes away with unit agreement, 25 and that and Mr. Bresnen alluded to it, that's the 0066 1 reason we created this language, and the 2 Legislature passed the law, is to simplify that 3 aspect. 4 The staff of the Lottery Commission 5 will have to continue to audit to ensure that a 6 charity's bingo proceeds are spent pursuant to law 7 and the only way that will work in River City is if 8 you then audit, which they have done successfully 9 the general funds of those five charities. 10 But I can assure you there won't be 11 many charities that'll ever join a unit if you have 12 to do it that way. 13 And as for the reference to the 14 attempt to save Administrative Rule 402.598(c), 15 that rule will either be -- I believe needs to be 16 rewritten, and if it doesn't, I believe there will 17 be litigation that will go on for two years on it, 18 the way it's drafted today. There are a number of 19 problems with it so please don't reference that in 20 this unit accounting. There are huge problems with 21 that and the staff are aware of some those huge 22 policy discussions about that. 23 So the simplification of unit 24 accounting can be met with those two changes. I 25 agree with the suggestions earlier about what type 0067 1 of inventory records need to be kept. 2 There was a lot of discussion about 3 that in the early drafts and none of us, including 4 Roy, at one time, we all got kind of lost as to 5 what inventory records need to be kept. I think we 6 can clear all of that up pretty easily. And I'll 7 be happy to answer any questions, except before 8 that, the tax-exempt status, that issue was raised 9 in December of '02 and January of '03 in this 10 meeting by Chuck Thompson of the North Dallas Bingo 11 Association, when we were having these early 12 discussions about unit accounting. Even before 13 2519 was introduced, this was the concept period. 14 And I recall the issue and I recall 15 with, and I believe it was Phil, or it could have 16 been Roy, shouldn't we get a comfort level from the 17 IRS, because wouldn't it be a neat trick if a bunch 18 of charities, we get a rule we can all live with, a 19 bunch of charities go do unit accounting and three 20 to five years after the fact, there's an audit by 21 the IRS and the IRS says you did it wrong, your tax 22 exemption is revoked and that reverberates through 23 the entire bingo community. 24 And it was my understanding that the 25 staff was going to undertake to lead the way, be 0068 1 the pathfinder to get -- to lead up to that. You 2 all have a relationship with the Internal Revenue 3 Service that we don't have. And I say "we," the 4 charitable community does not have. 5 And I don't mind drafting whatever 6 documents needs but I'm not a tax attorney and I 7 don't think my charities can pay me enough money to 8 become -- to have a comfort level as a tax 9 attorney, but that was one of the issues that we 10 had addressed a year ago. 11 Mr. Gabrillo has had some informal 12 discussions with someone at the IRS as to some of 13 the issues of, do you need a EIN number? Does the 14 fact that you have an EIN number, employer 15 identification number, affect your tax-exempt 16 status? But there are no resolution of those. 17 I'll be happy to answer any 18 questions. 19 MS. MATTHEWS: Well, I think, again, 20 that we could, instead of going the advance ruling 21 route, I believe your concern is very valid but I 22 think we can get an opinion from the IRS, 23 hopefully, in writing. 24 MR. FENOGLIO: Yes. 25 CHAIR BRACKETT: Okay. Thank you, 0069 1 Steve. 2 MR. FENOGLIO: Thank you. 3 CHAIR BRACKETT: Don Bishop, did you 4 want to make comments on the unit account? 5 DON BISHOP: Thanks. I'm Don Bishop, 6 Dallas, Texas, Post 31. I'll be more brief than 7 Mr. Bresnen and Mr. Fenoglio put together, Madam 8 Chairman. 9 Thanks for all the work you guys have 10 done on all this stuff. I know it's new and 11 complicated. I know that we're always told we need 12 to be careful what we pray for because we may get 13 it but we've got it. 14 We were all excited when we first 15 started thinking that we might have a chance of 16 getting this unit accounting actually approved 17 through the Legislature but we thought it would 18 simplify and reduce our record-keeping and we 19 thought it would reduce our expenses. 20 The way this is constructed, it will 21 add to our record-keeping and it will increase our 22 expenses. 23 The one way the people I'm involved 24 with have been able to survive in bingo is to keep 25 expenses and record-keeping low so we have a very 0070 1 minimum payroll. 2 We operate with one cashier, two to 3 three floor workers, depending on the size of the 4 crowd, a car, and one security guard. That's how 5 we'll survive. We can not add any hours to our 6 payroll. This is going to cause us to have to add 7 to our payroll. Thank you very much. 8 CHAIR BRACKETT: Thank you. Charles 9 Hutchings, did you want to address? You may -- 10 CHARLES HUTCHINGS: No, I don't 11 believe. It's been covered. 12 CHAIR BRACKETT: Okay. Thank you. 13 MS. MATTHEWS: Virginia, I have a 14 e-mail regarding this from a Charlene Keen. She 15 says: "I work with several charitable bingo 16 organizations and am wondering how the unit 17 accounting rules are coming. 18 I understand that I will need to go 19 through a licensing procedure. Also, how will we 20 be notified of what we need to do?" 21 CHAIR BRACKETT: Any other comments 22 on this right now? 23 Okay. Well, as we move on to another 24 part, I believe the advisory opinion. The first 25 thing I would like to do is something I failed to 0071 1 do but which is a whole lot of fun, I want to 2 introduce you to Patricia Greenfield, who is with 3 us today for her first meeting. And is very 4 well-informed and has been in the bingo industry 5 for quite some time. 6 Patty, would you like to just tell 7 us, in three seconds, your life story, your bingo 8 life story. 9 MS. GREENFIELD: My bingo life 10 story. I've been involved in the bingo industry 11 for about eighteen years, since 1984. I've worked 12 in a bingo hall as an usher, a cashier, and I've 13 managed a hall. And for many years now, I've been 14 providing bookkeeping services to charities and 15 that's what I do currently. 16 CHAIR BRACKETT: Okay. The next item 17 that we go to under number three is advisory 18 opinions and -- okay, Phil Sanderson is going to do 19 that now. And the comments -- we're going to have 20 to start limiting our comments to five minutes. 21 I thought you got stage fright and 22 disappeared. 23 MR. SANDERSON: Phil Sanderson, 24 Assistant Director of Charitable Bingo Operations 25 Division. I had to go take a little break. 0072 1 Madam Chair and Members of the 2 Committee, House Bill 2519 added language that 3 authorized advisory opinions and a person may 4 request from the Commission advisory opinion 5 regarding compliance with this chapter in the 6 rules. 7 The statute also required the 8 Commission to respond to advisory opinion request 9 not later than the sixtieth day after the date of 10 the Commission receives the request or receives 11 requested additional information. 12 The rule that you have in front of 13 you today provides guidance to the persons 14 concerning the agency's implementation of the 15 statute as well as provides the agency with some 16 degree of management over the advisory opinion 17 process. 18 The highlights of the rule are the 19 opinion request process, that additional 20 information provisions and response and subject 21 matter provisions. 22 The -- there's no subcommittee formed 23 on this particular rule and it's just a -- the 24 purpose is to provide a flow, orderly flow of 25 requests and the responses to enable the Commission 0073 1 to manage the process of the advisory opinions. 2 Staff would like to request that the 3 Bingo Advisory Committee propose the new 4 administrative rule advisory opinion to the 5 Commission for publication in the Texas Registry. 6 I'll be glad to answer any questions 7 anyone may have. 8 CHAIR BRACKETT: All right. Anyone 9 in the public like to comment on this? Okay, 10 Stephen Fenoglio would like to comment. 11 MR. FENOGLIO: My name is Stephen 12 Fenoglio again. 13 Thanks to Penny Wilkov and Phil for 14 taking the bull by the horns and drafting the 15 amendment of the proposed rule. 16 A couple of clean-up language, if you 17 will. 18 And it's unfortunate, and I've asked 19 several times that these rules be put with page and 20 line numbers because it certainly helps expedite 21 the discussion, and this one doesn't. But if 22 you'll subparagraph A at the last line of 23 subparagraph two, after the first word "notify," I 24 would suggest in writing, so it's just clear, I 25 think it would be typically the Commission practice 0074 1 that you do so in writing, you're requiring the 2 requester to put it in writing and so if the 3 Commission needs additional language, it should be 4 in writing. 5 On subparagraph B, subparagraph two, 6 at the very end of my first page before the last 7 sentence "other," I would add and I'll be happy to 8 give this language at the end, the Commission will 9 publish the request on its web site within, I don't 10 know how many days it would take the staff to put 11 it, but so many days. I mean, I don't know if it's 12 a week, or whatever, of receipt of the request. 13 And the same comment if you ask for 14 additional information put it on the web site. 15 Billy, I can anticipate, as I think 16 everyone can, that there will be -- if people don't 17 know about the request, you'll be covered up with a 18 same or very similar request from the number of 19 people. If you'll put it on your web site -- I 20 continue to be amazed at the number of people who 21 have access to the web. 22 If you let the public know, then they 23 may either, A, want to weigh in on an issue, or, 24 well, gee, that's already been asked and answered, 25 which takes me to one of the other comments -- 0075 1 MR. ATKINS: Steve, let me clarify, 2 your recommendation is that language be inserted as 3 a new sentence before the word "other"? 4 MR. FENOGLIO: Yes. 5 MR. ATKINS: Okay. Okay. And you'll 6 provide that language? 7 MR. FENOGLIO: Yes, I will. And, 8 again, the same kind of comment on subparagraph C: 9 Request for additional information. You're giving 10 the requester so many days to provide the 11 information. And, again, and I'll provide that 12 information, Billy. If I can get this on disk, I 13 can actually do it, you know, in an easier format. 14 My handwriting is terrible, but the same sort of 15 comment at the end of the first sentence of 16 subparagraph one, immediately before the second 17 sentence on "once." 18 And, again, at the end of that first 19 sentence "and shall publish on its web site the 20 requested additional information," or words to that 21 effect. So that, again, the public's aware, not 22 just this particular requester, there's a dialogue 23 going back and forth. 24 Under subparagraph D-1: The 25 commission will not issue an advisory opinion that 0076 1 concerns subject matter of, and I don't have a 2 problem with pending litigation because that's not 3 appropriate, but the words "contested case 4 proceeding," that needs to be massaged. And the 5 reason it does, Billy, is if you've got either an 6 informal audit or a, you know, a case where it's 7 going to hearing on a use of bingo proceeds, and a 8 charity is asking, not about those particular 9 issues, but just generally about the use of bingo 10 proceeds, you could get into a position where you 11 say, gee, we'd like to answer your question but our 12 rule precludes us from addressing that issue 13 because, and I can imagine, Billy, you're always 14 going to have a contested case proceeding on some 15 sort of an audit issue, either at the full-blown 16 contested case, or in the negotiations that go on 17 before it's actually docketed. 18 And I hate, you know, when a charity 19 doesn't have a dog in that fight of that use of a 20 bingo proceed, and let's say there are two 21 different fraternals; one's under a contested case, 22 the other is not, but you could take the -- you 23 might be forced to take the position, Billy, you 24 can't give any advice because this has to do with a 25 501(c)(10) organization and I don't think that's 0077 1 what you intended to do. 2 And then the final comment is in 3 subparagraph E-4. I don't know that you really 4 want to say it the way you did. Where you say 5 "Only the charity that asks for their opinion can 6 rely on it." Think that through. 7 You get a request that says, you -- 8 it's a 501(c)(3) organization can use bingo 9 proceeds in a sort of fashion. Then every 10 501(c)(3) when they read 4, or they talk to their 11 lawyer and say, okay, can I rely upon that advice? 12 No, the rule says only the charity that does it. 13 I can't remember how many hundreds of 14 (c)(3) organizations you have but I can anticipate 15 then all 300 (c)(3) organizations asking the same 16 question, so they can be covered. 17 And I understand from a lawyer having 18 represented an agency before, you want to be 19 careful that you answer Mr. Whittington's question. 20 And Ms. Matthews says, well, gee, I kind of like 21 the way Larry asked it and I kind of like the way 22 they answered it. I'm going to -- I've got a loop 23 hole here and I'm going to take advantage of it and 24 so I'm -- not that you would, Ms. Matthews -- but 25 I'm going to take advantage of it and I want the 0078 1 rule to -- language changed so I can. Now I can 2 understand that. But at the same time, if you -- 3 if there's not something generically, and, for 4 example, IRS revenue rulings are relied upon solely 5 by the requester, but it can be used as precedent 6 by another taxpayer in making their argument to the 7 agency. But the way the language is drafted today, 8 you absolutely couldn't even use it as a precedent 9 or as an argument: Well, gee, Larry's charity had 10 these facts and we've got very close to those 11 facts, why can't we get the same result? Because 12 if you said that was okay for Larry, then you ought 13 to be able to do it for us. 14 And if Phil comes back and says, 15 well, but there's a huge factual difference, well, 16 then, okay, you shouldn't use the opinion that 17 Larry got. But it's close to it, then a SOA judge 18 or the agency should be able to say, okay; 19 otherwise, again, I can -- I would advise every 20 client, once they get an opinion, everyone else 21 asks for the same opinion. And then your staff 22 will be covered up, and none of us want that. 23 We view this, the advisory opinion 24 process, as a good tool. It should be a selective 25 tool. And I don't have suggested language on (c) 0079 1 or (e)(4), but I'll be happy to work with Phil or 2 the staff or whomever, to come up with a 3 middleground. I think this is one of the rules 4 that's pretty close to being ready for sending on. 5 Thank you and I'll be happy to answer 6 any questions. 7 CHAIR BRACKETT: Is there anyone else 8 that wanted to speak to this, kind of general under 9 here. 10 Phil, you have requested that we 11 approve this for publication; is that correct? 12 MR. SANDERSON: I've requested that 13 you all recommend to the Commission that it be 14 published for comment. 15 CHAIR BRACKETT: All right. Are we 16 ready to recommend or do you need to take some of 17 these suggestions today and work on them? 18 MR. ATKINS: We recommend together 19 with Steve's comments and suggestions be considered. 20 CHAIR BRACKETT: So we could 21 recommend that this be posted for public comment, 22 I'm using the wrong word, on posted -- 23 MR. SANDERSON: Well, you can 24 recommend that we take Steve's comments and 25 consider them, and if acceptable or so forth, 0080 1 revise the rule and present that at the next 2 commission meeting before publication -- 3 CHAIR BRACKETT: For publication. 4 MR. SANDERSON: -- Texas Registry. 5 CHAIR BRACKETT: Publication was the 6 word I was struggling to get. Okay. All right. 7 Is this agreeable? No problems with that. All 8 right. Then the general consensus is that we will 9 recommend it for publication with all the comments 10 made today. And we'll see it again at the next 11 meeting. On the bonds and other security? 12 MS. MORRIS: Excuse me, Madam 13 Chairman? 14 CHAIR BRACKETT: Yes. 15 MS. MORRIS: Did you-all vote on that 16 recommendation or did you want to get a sense -- 17 CHAIR BRACKETT: I thought we had a 18 general consensus. Everyone was nodding their 19 heads but if someone would like to make a motion -- 20 MS. MORRIS: I don't know that you 21 have it on the record. 22 CHAIR BRACKETT: Well, if someone 23 would like to make a motion; nods don't appear on 24 the record. 25 MS. TAYLOR: I make a motion that we 0081 1 send that on to the Commission with the inclusion 2 of Steve's comments. 3 MS. MATTHEWS: Second. 4 MR. WHITTINGTON: Second. 5 CHAIR BRACKETT: Okay. It's been 6 moved and seconded. All those in favor? 7 ALL: Aye. 8 CHAIR BRACKETT: Thank you. All 9 right. We're ready to hear comments on -- okay, 10 bingo reports and shall we -- let's take these 11 separately. The comments on the bingo report, 12 402.580. Terry? 13 MS. SHANKLE: Yes, ma'am. Thank you. 14 Good morning. My name is Terry Shankle, 15 S-h-a-n-k-l-e. 16 This morning I'm bringing to you a 17 revision to the bingo rule 580, bingo reports. 18 This -- again, this did not have a subcommittee. 19 It was one that in the review of House Bill 2519, 20 we knew that with the changes to the due date that 21 this particular rule would have to be revised. 22 On 580, all we're doing is changing 23 from the 15th to the 25th of the month following 24 the end of the quarter for conductors and lessors. 25 And also stating in (c)(1) that a unit manager, 0082 1 designated agent or trustee or authorized 2 organization would have to file formally in court. 3 That is all the change to that particular rule. 4 MS. MATTHEWS: Should this say 5 somewhere what date this is effective? 6 MS. SHANKLE: Well, the bill becomes 7 effective September the lst, I'm sorry, however it 8 does say that -- 9 MR. ATKINS: I'm sorry, ma'am, I'm 10 not sure I understand your question. 11 MS. MATTHEWS: Well, I understand 12 that the bill says September 1st but should that be 13 in here as well that this changed? 14 MR. ATKINS: No. 15 MS. MATTHEWS: Okay. 16 MR. ATKINS: Statute would override 17 the rule, effective September 1st, it's effective. 18 This is just bringing this rule in compliance with 19 that legislative changed. 20 CHAIR BRACKETT: Does that answer 21 your question, Marilyn? 22 MS. MATTHEWS: Yes, it does. 23 CHAIR BRACKETT: Okay. 24 MS. SHANKLE: So with that, I would 25 like to recommend that the BAC committee propose 0083 1 this to be brought forward to the Texas Lottery 2 Commission meeting at their next meeting. 3 MS. MATTHEWS: I'll make that motion. 4 CHAIR BRACKETT: All right. Now, 5 which one are you reporting on the 580(b), reports 6 and 583 bonds, altogether -- 7 MS. SHANKLE: Yes, ma'am. 8 CHAIR BRACKETT: -- in one 9 recommendation? 10 MR. ATKINS: That's not correct. 11 She's only discussed 402.580 bingo reports. 12 CHAIR BRACKETT: Okay. 13 MR. ATKINS: The -- and you 14 referenced taking each rule separately. So her 15 request at this time would be that the advisory 16 committee recommend 580 to the Commission for 17 publication in the Texas Register. 18 CHAIR BRACKETT: All right. I think 19 we're all clear on what the recommendation is now. 20 Is there any of you who signed up just to speak in 21 general on Item number three, have any comments you 22 want to make? Did you say "yes" or "no"? 23 MR. FENOGLIO: Stephen Fenoglio, 24 again. Just briefly, does the quarterly report 25 requirement for a unit address whether they have an 0084 1 EI -- the unit has EIN number, and, if so, how that 2 would be filed if it didn't have the EIN number? 3 Do you understand my question? 4 MS. SHANKLE: Does the rule on unit 5 accounting -- 6 MR. FENOGLIO: Not on unit 7 accounting, on this report, if the unit is filing 8 the quarterly report, and according to Roy, the IRS 9 has advised a unit is not required to have an EIN 10 number, then what -- I believe every charity that 11 files a quarterly report has to use their EIN 12 number. The unit's filing report, it may not have 13 an EIN number, are they going to be in violation 14 and you can't accept the report from the unit 15 because they don't have EIN number? 16 MR. ATKINS: My understanding, and 17 Terry will correct me if I'm wrong, but the way the 18 quarterly report for the unit is being designed is 19 it will capture the EIN for the individual 20 organizations that are a number of the unit. 21 MS. SHANKLE: Okay. What we had 22 discussed is that the unit manager will have a 23 license, therefore have a license number, taxpayer 24 number, and all of those organizations underneath 25 that unit manager would roll into that one 0085 1 quarterly report so that the unit manager will need 2 to have a taxpayer number. 3 MR. ATKINS: -- and if there's no unit 4 manager? 5 MS. SHANKLE: Then the designated 6 agent would have a temporary number that -- and if 7 it's a trust agreement, then we will use the 8 designated, the trustee organization taxpayer 9 number. 10 CHAIR BRACKETT: Okay. Do we have a 11 second to Marilyn's motion? Anyone want to second? 12 Somebody want to second? 13 MS. TAYLOR: I'll second it. 14 CHAIR BRACKETT: Okay. All right. 15 Thank you. All right. It's been moved and 16 seconded that we recommend to the Texas Lottery 17 Commission the proposed amendment 402.580, bingo 18 reports, administrative rules be recommended as 19 been presented to us here. 20 If there's no further discussion, are 21 you ready to vote? All those in favor, please say 22 aye. 23 ALL: Aye. 24 CHAIR BRACKETT: All right. That's 25 the majority. All right. You're now going to 0086 1 present 5 -- 402.583. 2 MS. SHANKLE: That is correct. 3 Again, on Bingo Administrative Rule 402.583, Bonds 4 or Other Security. There was not a subcommittee. 5 When reading House Bill 2519, this came to light 6 that this particular rule would have to be revised. 7 I went in and just included, under (a) Who must 8 post a bond or other security. 9 Due to the requirement by the bill 10 that the unit manager be licensed and be bonded. I 11 put that language under item four, and item four 12 defines what the requirements are and how we will 13 determine what the bond will be for that unit 14 manager. 15 In researching, Sharon Ives sends 16 information to us and gave us names of 17 organizations on calls that they had paid taxes in 18 the year 2002, up to $68,000 in prize fees on a 19 yearly basis and said, well, if they paid $68,000 20 in taxes, and -- because, again, the bill refers to 21 Section 514 of the Bingo Enabling Act, that we can 22 charge up to three times the quarterly amount, that 23 that would cost an organization two hundred and -- 24 well, three times that the bond requirement would 25 be $204,000. 0087 1 MR. ATKINS: For the unit manager, 2 not the organization? 3 MS. SHANKLE: For the -- yes, for the 4 unit manager. And so, again, I started researching 5 and asking my staff to pull information on why were 6 bonds required, what were they for, et cetera. 7 And what I found out is that anyone 8 that deals with any amount of money $100, or more, 9 should be bonded. And after reading that, I 10 started looking through the web -- the Yellow Pages 11 and I thought, well, gosh, maids have to be 12 -- the people that clean your house have to be 13 bonded, people that build your fence have to be 14 bonded, and so in keeping with that these -- well, 15 that the unit managers are dealing with so much 16 money, and in cash, the requirement to post a bond 17 in the amount of three times is, to me, a very 18 valid amount. 19 The bond is the only security stay 20 against the loss of prize fees. 21 MS. GREENFIELD: Do we know how much 22 that would cost? How much it would cost a person 23 to have a bond? 24 MS. SHANKLE: No. We did contact 25 several insurance companies yesterday, CNA and some 0088 1 others, and they had not gotten back with us. We 2 had talked in general asking for, it's called a 3 fidelity bond and also an employee dishonesty, and 4 they had not returned our calls, or they were going 5 to research it and call us back, and as of this 6 morning, they have not. 7 MS. GREENFIELD: And a unit manager 8 is over one unit and if you have someone they can 9 be a unit manager over several different units so 10 you would require several different bonds for that 11 same person? 12 MS. SHANKLE: That is correct. 13 MS. GREENFIELD: So I think costs 14 would be an issue that I would like to find out 15 about before I'm comfortable with this. 16 MS. SHANKLE: In our research, some 17 time ago, I believe it was one-tenth. Now, each 18 bonding company is going to be different. And, 19 again, we contacted those that we had on our web 20 site and there might be more, so what I heard in 21 the past is that it's one-tenth percent. 22 CHAIR BRACKETT: So you're asking for 23 -- when you say a bond or other security, other 24 security to include your insurance that you have -- 25 that an organization would have? 0089 1 MS. SHANKLE: Okay. Each -- right 2 now, the organizations have the bonds. If a unit 3 manager were licensed and took over that 4 organization's accounts, the organizations would 5 get rid of their bonds and the unit manager because 6 the unit manager is the one that is going to be 7 responsible for all of it and will be held totally 8 liable. 9 CHAIR BRACKETT: Okay. 10 MS. TAYLOR: At the current time, if 11 the organization is current in paying all their 12 bills, isn't their bond released after three years 13 or some amount of playing time that -- 14 MS. SHANKLE: Suzanne, it is. If, 15 again, if they have eight consecutive quarters of 16 good tax-paying history, we look at their account 17 and we do release it. 18 If a jeopardy determination becomes 19 final, then if we have released one, then we will 20 require them to post another one and it will be 21 held at which time the organization no longer 22 conducts bingo. 23 MS. TAYLOR: So is this something 24 that would also be done for the units after they've 25 paid their taxes for eight consecutive quarters, 0090 1 would it still be required or will it be released? 2 MS. SHANKLE: I foresee it, this 3 particular bond to be held until which time the 4 unit manager is no longer licensed. 5 MR. ATKINS: Again, it was -- the 6 information that Sharon provided was very useful 7 to us. When you see it on paper, the amount of 8 money that these individuals have control over, 9 and, you know, the lack of any kind surety. 10 MS. GREENFIELD: I think Stephen made 11 the comment about how no one would want to do this, 12 no one's going to want to be a unit manager if the 13 bond is so -- the amount is so high and so I mean, 14 that's a concern too that we're going to have to 15 shut down that down. People won't want do it. I 16 understand what you're saying. 17 MR. ATKINS: Yeah. And it's a 18 concern that we're going to continue to have and 19 want to address, whether it's the unit manager, 20 designated agent, or whatever. I think everybody 21 would agree someone with that much control over 22 that much money, there has to be some kind of 23 control. 24 MS. TAYLOR: Does it say anywhere -- 25 I mean, I know that you release the bond, is it 0091 1 actually in the rules or is that just something 2 that is done for the current -- 3 MS. SHANKLE: I'm sorry, it is. In 4 "G," release of bond, it is in 583. 5 MS. TAYLOR: Okay. 6 CHAIR BRACKETT: Are there any other 7 questions? 8 MR. PAVLOVSKY: Terry, I have one 9 question. I didn't see anywhere in here where it 10 said that a designated agent or a trustee would 11 have to have that bond. 12 MS. SHANKLE: That -- you're 13 absolutely correct. The bill does not designate or 14 state that a designated agent or a trustee has to 15 be bonded. 16 MR. PAVLOVSKY: Only a unit manager? 17 MS. SHANKLE: That is correct. 18 MR. PAVLOVSKY: I'm -- I'm missing 19 something. 20 MR. SANDERSON: Let me answer it. 21 The act or the 2519 specifically states that if the 22 unit uses a designated agent or trustee, then the 23 organizations within the unit are responsible for 24 compliance with the reports and paying the prize 25 fees, so they would each still continue to maintain 0092 1 their bond. 2 MR. PAVLOVSKY: Okay. 3 CHAIR BRACKETT: Okay. Are you ready 4 for action on this? Did you have -- want to make a 5 comment? 6 UNIDENTIFIED SPEAKER: Are you 7 looking at me? 8 CHAIR BRACKETT: Well, not really. 9 MS. IVES: Madam Chair, do you -- 10 CHAIR BRACKETT: Yes. Your turn. 11 MS. TAYLOR: While we're waiting for 12 Sharon to come up, I just wanted to ask you one 13 more question. I'm looking that if a new bingo 14 hall was opening and look at the other bingo halls 15 around there and base the bond on, determined on 16 the other bingo halls, what if it's like a ten-cent 17 bingo hall? If you've been in ten-cent halls, I 18 mean, their gross is like really, really low and if 19 they tell you that they're going to operate as a 20 ten-cent hall or as one of the halls that, you 21 know, it's not going to pay out $2500 a session, 22 are you still going to charge them three times the 23 commercial hall that's, you know, has a pretty big 24 gross compared to what -- and pay-out, compared to 25 what the new one is going to try doing? 0093 1 MS. SHANKLE: Well, until there's 2 some type of history on that ten-cent bingo, yes, 3 ma'am, because -- yes, ma'am. 4 MS. IVES: Good morning, still. This 5 is Sharon Ives. I'm with Fort Worth Bookkeeping 6 and I also represent, or I handle 44 bingo 7 organizations, bingo bookkeeping. And thank you, 8 Billy, for the -- for the comment you made earlier. 9 I did e-mail Roy Gabrillo and 10 carbon-copied Terry Shankle here. Basically what I 11 did, I took nine bingo halls that I handle all the 12 bookkeeping for within that hall. Some of them may 13 have five organizations, some of them four, some of 14 them three, but basically what I did was I added 15 all the prize fees that they've paid for the year 16 2002, for that nine bingo halls, that totaled 17 $568,072.80. 18 The way I calculated before I took 19 that, multiplied it times three. According to the 20 rule, that was 1.7 million. 21 In the Dallas/Fort Worth area, any 22 bonding company, the ones that I have contacted 23 will charge 20 percent of whatever the bond amount 24 is. So if I had to get a bond as a unit manager 25 for 1.7 million dollars, that would be $340,843.68, 0094 1 which totally floored me. 2 Then I was told I calculated that 3 wrong. That I was supposed to take that amount, 4 divide it by 12 to get a monthly average. So then 5 I went back to the drawing board. 6 The total amount of bond using this 7 calculation would be $28,403.64, and that is still 8 basing it on 20 percent that the surety company or 9 the fidelity company, whichever company, would 10 charge. 11 And like I said, that's just for 12 Dallas/Fort Worth. I didn't check any other areas 13 around the state. That's still pretty stout. 14 MS. MATTHEWS: And that's presuming 15 the unit manager is managing nine halls? 16 MS. IVES: That's correct. 17 MS. MATTHEWS: Is that reasonable, 18 that they would manage nine halls? 19 MS. IVES: Well, I would -- I mean, 20 me, personally, I don't have $28,000 sitting around 21 that I could go out and get bonded to be a unit 22 manager for those nine halls. 23 MS. SHANKLE: I would like to point 24 out that Sharon is going to be handling, and this 25 is just in prize fees, a half a million dollars so 0095 1 -- and not that Sharon would do such a thing, but 2 if she was dishonest, how -- who is going to 3 recover that money? That's why the bond is there. 4 That if she absconds with the money, that we will 5 have a way for the state to get -- receive its 6 share of the prize fee. 7 MS. GREENFIELD: But you already said 8 that the charities were still going to keep -- 9 they're still going to be required to post their 10 bond. 11 MS. SHANKLE: Only as a unit manager, 12 if Sharon is licensed as a unit manager, all of the 13 organizations underneath her would not have to have 14 a bond. 15 If a designated agent or a trustee, 16 because the -- because, again, states that those 17 two are going to be held responsible, they would 18 have to be bonded; the organizations would have to 19 be bonded, not the designated agent and not the 20 trustee. The unit manager is licensed. 21 CHAIR BRACKETT: And the bond is 22 based on prize fee -- on what the prizes are, 23 rather than on what the deposits are, is that what 24 you're saying? 25 MS. SHANKLE: Is on -- it's based off 0096 1 of the prize fees that Sharon sends to the state on 2 a quarterly basis. 3 CHAIR BRACKETT: Oh, okay. Prize 4 fees. 5 MS. MATTHEWS: How are bonds 6 calculated now for charities? Is it the same 7 procedure? 8 MS. SHANKLE: Yes, ma'am, it is. We 9 take their prize fees that have been paid for the 10 last four quarters and multiply that by three, we 11 get an average and multiply that by three. 12 Again, it is stipulated in 583 how 13 the bonds are calculated and released or forfeited, 14 et cetera. 15 MS. MATTHEWS: So really we're just 16 talking about the same thing; somebody else paying 17 it then -- 18 MS. SHANKLE: No, the -- 19 MS. TAYLOR: It costs the charities 20 $100 to get their bond. I mean, that's what we 21 paid two years ago in the charities I was working 22 with, it cost $100 each to get a bond. So, no, 23 you're talking a tremendous difference in cost. 24 MS. IVES: And also, if I may, just 25 to let you know, the organizations the 44 0097 1 organizations that I handle, they're not required 2 to keep a bond and they haven't for some time. You 3 know, in the beginning, they had to get a bond. It 4 was released in eight quarters, so none of these 5 organizations are required to put up a bond. 6 And I've been doing your books from 7 day one. I mean, I've been doing it for nineteen 8 years, and I haven't ran off with any money yet. 9 And also, for the record, as a 10 business owner, you know, for Bookkeeping, 11 Incorporated, the company is bonded as well as the 12 employees that work for my company. Thank you. 13 MR. WHITTINGTON: Could I ask you a 14 question? 15 MS. IVES: Sure. 16 MR. WHITTINGTON: I can't foresee 17 charity giving you my money and letting you write 18 a check by yourself anyway, I can't -- there ain't 19 no way I'm going to do it. I mean, that's why the 20 money goes to the bank first and then you go to the 21 bookkeeper. 22 MS. IVES: That's correct. You are 23 correct, Larry. 24 MR. WHITTINGTON: So you're not in 25 control of the charity money, you're just doing the 0098 1 bookkeeping for them and I'm going to make sure 2 that you can't sign the check by yourself. 3 MS. IVES: Okay. That is correct. 4 We have checks and balances all the way through. 5 MR. WHITTINGTON: So I'm just getting 6 to the point why this big bond to be a unit manager 7 because if you're my unit manager, you're not 8 going to be able to take the money anyway, you 9 know, you might control the money and tell me why 10 each organization got put this money at, that's -- 11 MS. IVES: Right. I mean we -- 12 MR. WHITTINGTON: -- that's basically 13 it. 14 MS. IVES: We have meetings, we send 15 out financials, I mean, everything has checks and 16 balances. 17 MR. MOORE: So Sharon, you'd have to 18 charge the charities more for your service, I 19 guess, is what it would end up being. 20 MS. IVES: Well, Danny, first I'd 21 have to come up with the $28,000 to get bonded but, 22 yes, that -- if I was a unit manager, that's 23 exactly what I would have to do as a business point 24 of view. 25 MR. ATKINS: Did you know that there 0099 1 are also charities that have given bookkeepers 2 rubber stamps to use on checks? 3 MS. IVES: You betcha. 4 MS. GREENFIELD: How much of a 5 problem is this? I mean, do you have charities 6 coming to you saying, oh, my bookkeeper has run off 7 with my money a lot? 8 MR. ATKINS: Yeah. Not a lot. I 9 don't know how you define "a lot" but yes, yes, we 10 do, but that's something we hear. 11 MS. IVES: But not in the 12 organizations that I do books for. I just want to 13 put that on the record. 14 MS. MATTHEWS: But Sharon, you said 15 your company is bonded? 16 MS. IVES: That's correct. 17 MS. MATTHEWS: So this would be a 18 duplication, wouldn't it? 19 MS. SHANKLE: No, it's not. 20 MS. IVES: The bonding amounts would 21 be different. I would have to get a bond to 22 satisfy that liability with the state versus the 23 bond that I have to put up through my company as 24 far as banking purposes, those amounts are going to 25 be totally different. 0100 1 MS. SHANKLE: And the bond that she 2 has for her company would not be what the State of 3 Texas would need. It's two different things. And 4 her employees would have to be convicted, 5 dishonesty, or whatever, so they are two separate 6 types of bonds. 7 MS. IVES: Any other questions? 8 CHAIR BRACKETT: So what your comment 9 is, is that it's too expensive to do, is that the -- 10 MS. IVES: That would be a big cost 11 to, depending on how -- there's going to be a cost 12 to the charities in the beginning or a cost to me 13 in the beginning, and then I'll have to turn around 14 and charge the charities more to recoup my cost, so 15 it's a cost either way. 16 CHAIR BRACKETT: Okay. So it's this 17 language that the amount of the bond or security 18 require to be posted by the average prize fee 19 calculated times the numbers of conductors in the 20 unit times three. 21 MS. IVES: Times three. That's 22 correct. I mean, I'm just saying this for 23 information purposes only. I would take it -- in 24 my particular case, I would be a designated agent. 25 I wouldn't be a unit manager because of that cost. 0101 1 MR. WHITTINGTON: I don't think we're 2 going to have too many unit managers anyway looking 3 at that. I mean -- I mean, I can't see nobody 4 saying, okay, I'm going to come up and do your 5 books and you pay $50,000 but I gotta get me a 6 $28,000 bond to do it. I can't -- I can't see that 7 happening, so that's something that I guess most 8 people are not going to have, especially charities 9 the way bingo is in Texas today. 10 MS. IVES: That's true. Thank you. 11 CHAIR BRACKETT: Are there any other 12 comments from the public? Okay. 13 DAVID HEINLEIN: David Heinlein. 14 First of all, I want to see if we can clarify 15 really what the amount of the bond is that we're 16 talking about. 17 As I read this, and maybe I've been 18 reading it wrong the whole time. It says, to me, 19 that we what we're concerned about is the quarterly 20 amount of bond fee, I mean prize fee that is due. 21 And when I read both for the conductor license and 22 for the unit manager license, the requirement is 23 the average of the previous four quarters, not the 24 total of the four previous quarters, but the 25 average of the four previous quarters. 0102 1 So if the prize fee that was to be 2 paid by a charity was $5,000 for a quarter, then 3 the bond is for three times that amount, $15,000. 4 Now in the case of a unit, the 5,000 5 times however many conductors there were, if there 6 five conductors, then that's $25,000 times three, 7 would be $75,000; however, in the state that we're 8 in now with the increase in prize fees due to the 9 increase in sales of instant bingo, in our 10 situation, we're seeing charities have a prize fee 11 of over $8,000 in a quarter. Some up to $10,000 12 average in a quarter. 13 So if your previous four quarters 14 might not be today but if it continues for the rest 15 of this year, then that average quarterly prize fee 16 for a particular hall, in the case of five halls at 17 $10,000, would be $50,000, and then the bond 18 requirement would be three times that, $150,000. 19 The statute says that the bond 20 requirement shall not exceed three times, so I'm 21 not sure I understand why we're making the bond 22 have to be that maximum amount. 23 I think the intention was is that if 24 there was reason to believe that there was a 25 problem with that charity, or in that case, a unit, 0103 1 then the Commission should then require up to that 2 three times. But I think that was in the case of 3 some problems, where they've been delinquent in 4 their taxes but not in an initial time frame. 5 Now, I'd like clarification. Am I 6 understanding that correctly? We are talking about 7 a bond amount that's for the amount of the prize 8 fees in a given quarter? 9 MS. SHANKLE: Yes? 10 CHAIR BRACKETT: Four most recent 11 quarters. 12 DAVID HEINLEIN: Not the -- not the 13 -- the total of all four quarters, but the average 14 of a quarter; is that correct? 15 MS. SHANKLE: Yes. For each 16 organization in that unit, and then we would get 17 the average and multiply that by three. 18 DAVID HEINLEIN: Right. So both 19 numbers that Sharon gave are both wrong. She, in 20 one case, used a number of twelve months and in 21 another case of one month. 22 MS. SHANKLE: But in her -- in her 23 defense, she was talking about the bonding company 24 when she divided that by 12, I believe, and not -- 25 I don't know. 0104 1 DAVID HEINLEIN: In any case, the 2 problem would still exist of the aggregate amount 3 in halls that are very successful right now wanting 4 to go into that t,hey would be looking at a very 5 high cost in a bond, it could be, in our case, be 6 $150,000 bond and that would require $30,000, so 7 that would eliminate the possibility of the unit 8 manager. 9 Maybe there's also a misconception of 10 what that unit manager's responsibilities are by 11 the Commission and maybe it's not written right, 12 but the unit manager does not have that total 13 control of the money, like it's been supposed to 14 have. 15 We do a lot of books for a lot of 16 charities, 3300 charities, and we write all the 17 checks but we don't sign them. We don't have any 18 control over where those funds are being, you know, 19 we don't have any control over those funds. 20 The charity puts the money in the 21 bank. We simply, on their request, cut a check, 22 and they take that check and they sign it and they 23 send it to the recipient or the employee, so we 24 really are not handling any money. So I don't 25 understand why a unit manager would have to be even 0105 1 bonded at all. Does that make sense? 2 MS. SHANKLE: Okay. I'm sorry. I 3 disagree with your comment. The way that I read 4 the bill is that, yes, the organizations in that 5 unit will deposit their funds from the day's 6 activities and then it is the responsibility of the 7 unit manager to disburse those funds from that one 8 account, whether you have access to that checking 9 account. 10 DAVID HEINLEIN: Well, certainly if 11 the unit manager had control of the funds, I would 12 agree with you. I don't think that's ever going to 13 happen though in a unit. 14 MS. SHANKLE: But the bill states 15 that the unit manager would be held responsible for 16 the entire compliance of the unit. 17 DAVID HEINLEIN: Okay. So I do 18 understand that part that, yes, the intention of 19 the unit manager as opposed to a designated agent 20 would be to relieve the liability from the 21 charities and their reason for wanting to go to 22 unit manager is that person then is responsible for 23 the payment of those prize fees and being certain 24 that the money is available to pay it with, and, 25 therefore, they don't have that responsibility. If 0106 1 there's a failure to pay the fee, then the unit 2 manager is responsible for that even though he 3 doesn't control the money. 4 So that's kind of like a double share 5 -- but certainly if the unit manager was going to 6 have that responsibility, then he would certainly 7 have to control, or she would have to control the 8 money that's in the bank account, being certain 9 that every day the money is going into the bank and 10 maybe even taking control to put it in the bank to 11 make sure it's in the bank, so it would increase 12 that liability on that person's part as well. 13 But the bond requirement being that 14 excessive amount of three times, that seems 15 -- that's just going to be the limiting factor of 16 ever having a unit manager at all. 17 And I certainly appreciate the need 18 to protect the state from, you know, any deficiency 19 of those funds being paid but I don't know if we 20 need to make that three times when the statute says 21 it shall not exceed that. 22 Is there not a number that would be 23 protective to the state that would not have to be 24 three times that amount, because if that amount of 25 money is not paid on that quarter on the next day, 0107 1 there's going to be the bells ringing and you're 2 not going to let that continue. You're going to -- 3 so you're going to be able to stop the amount of 4 funds increasing to the state. Is that not right? 5 MS. SHANKLE: Due to the fact that 6 the unit manager, again, is licensed, we have 7 procedures that have to take place in notifying of 8 the delinquencies and of setting of the hearings 9 and then the hearing notice dates and so past 10 history has told me that it takes at least 60 to 90 11 days to revoke someone's license, and my 12 understanding is -- well, I'm assuming, which that 13 scares me, that the unit manager will continue to 14 be a unit manager under the Administrative 15 Procedures Act, so that's why I'm staying with the 16 fact that it needs to be three times is because I 17 cannot make you stop that day that you're past due 18 one day. 19 DAVID HEINLEIN: So it's just a -- 20 it's just a matter of the fact that the 21 accumulation of the debt could continue that we're 22 concerned about and I can appreciate that. 23 CHAIR BRACKETT: Okay. Thank you. 24 One more comment? Anybody would like to make such 25 comment regarding this? 0108 1 MR. WHITTINGTON: I would like to say 2 one more thing but it's going to be short. 3 Most of the bingo halls are operating 4 and that been operating for years, I'm sure they do 5 get a unit person or unit accounting person, it's 6 going to be the same person they've been working 7 for this organization for years that's been 8 handling the books, that's been doing the stuff for 9 the charities, which I don't plan on cutting them 10 back $5,000 and not spending more money for them to 11 get approved for unit accounting because it's going 12 to make his job easier through the unit accounting 13 for these charities, with less checks being written 14 and everything like that. 15 And I can see if I don't trust this 16 person, I mean, it's going to be distrust 17 everywhere. I'll basically know this in a few 18 years. I mean, we may have that the same person 19 working for us for seven years and she's going to 20 do the unit accounting too, or she was, but I can 21 see it's just really adding on more expense for the 22 charities because they're going to be using the 23 same people that they've been using anyway to do 24 the accounting, like Sharon and David, people like 25 that. 0109 1 I can see somebody new coming in that 2 you all don't know, the charities don't know but 3 the charities, they're going to keep up with what 4 they did every day because it's so tight and they 5 are pressing so much to get donations and I can see 6 these charities keeping up with every penny that 7 comes into accounts every day and keeping up with 8 the bookkeeper or the unit accounting manager 9 making sure the money is there and send it in on 10 time. 11 I mean, they've got to do something. 12 They can't just say we just send it off and we just 13 check with you in three months. That's not going 14 to happen. 15 MR. ATKINS: And just so you know, 16 Larry, I think that we would disagree with you to 17 the extent that just because someone's had a 18 long-term relationship with someone, it means that 19 nothing's going to run in the future, because, 20 again, we've seen that also. 21 People that have been members of 22 organizations for a decade who all of a sudden it 23 turns up through an audit or whatever, funds are 24 missing. 25 MR. WHITTINGTON: I understand that, 0110 1 Billy, I understand what you're saying. 2 MS. SHANKLE: And to Billy's comment, 3 through the research, I read that the person that's 4 going to, well, most likely take the money is an 5 employee that's been with you for ten to fifteen 6 years because they know the systems and what is in 7 place and everything to skirt those. So, you know, 8 time factor, just because an employee has been with 9 you for a long period of time does not -- 10 MR. ATKINS: Well, and, again, I 11 think the broader issue that was raised, and I know 12 you want to move on, Virginia, but through Sharon's 13 information, I don't know if you've had a chance to 14 see it or whatever, but there are people out there 15 with access to tons of bingo money that are more or 16 less beyond the reach, and, you know, I know you 17 don't want that so that's what's raised that flag 18 and that's what, you know, has caused us to start 19 asking these questions. 20 MR. WHITTINGTON: Well, I understand 21 that, I mean, but I'm saying the bingo didn't start 22 today, I mean, bingo, we've been operating with the 23 same people and the same people operating bingo for 24 years and I know in fact that that's a possibility 25 of somebody doing that and you all probably could 0111 1 control it better if it was a unit manager covering 2 everything he got to have his own bond and he got 3 up to come up with certain amount that's missing. 4 I mean, that's understandable. I understand that. 5 But the money part of it, the bond 6 part, I just can't see somebody that's making a 7 certain amount, and, you know, maybe they do make 8 two- or $300,000 a year, I don't know but not 9 mine. Just come up with that type of money for a 10 bond, I mean, I can understand the bond part and I 11 can understand what David is saying that maybe it 12 should be reduced to a certain amount, not three 13 times. I can see one time, you know, so that's 14 still a lot of money to be put up, about 10,000, 15 you're looking at in that case, compared to 28,000. 16 The money will be there from the bond company and 17 keep it down for somebody that they wanted to take 18 something from the organization. 19 But I know my organization they keep 20 up with everything. They're on top of their money 21 when they get it, on a daily basis almost. And 22 they look at it almost every week and they match 23 it, you know, that's what I'm saying. 24 I know some people might not do that 25 but a lot do and that's my big concern about losing 0112 1 somebody, telling them they need to get bonded if 2 they're going to keep working for the company. 3 MR. ATKINS: And that's unfortunate 4 because of the ones that don't do that, that we 5 have to consider these kind of measures but -- 6 MS. TAYLOR: What is the big 7 difference between the unit manager and the 8 designated agent? I realize one is licensed and 9 one is not, but besides that, if Sharon was the 10 designated agent, what would be the difference in 11 what she was doing? 12 MS. SHANKLE: The only difference 13 between a unit manager and a designated agent is 14 that the unit manager is licensed and bonded and 15 held responsible for all of that, not the conduct 16 of bingo itself but for all of the other designated 17 agent, the organizations are held responsible for 18 the compliance of the act and the rules. 19 MS. TAYLOR: So it just sounds like 20 that they need to be the designated agent and the 21 unit manager would just go off and, I mean, you 22 know, I mean, it just makes it much easier, why 23 would you want to do all of this? So, anyway, just 24 -- I was just wondering. 25 CHAIR BRACKETT: Okay. Ready for the 0113 1 question? Ready to vote? We have been asked to -- 2 asked that the proposed amendment to 402.583 3 regarding bonds and other security be published in 4 the Texas Registry for formal comment. All those 5 in favor please say aye. 6 MR. ATKINS: I don't think you ever 7 got a motion. 8 CHAIR BRACKETT: I mean, I'm sorry, I 9 did not get a motion. I just like to do things, 10 Billy, without any help so -- actually, if you want 11 to get real technical, when something goes to -- 12 from another group, you don't have to have a second 13 to a motion but it would be real nice if we had a 14 motion, I mean a second to my motion, as I read it. 15 I'm not making the motion, I'm reading the 16 recommendation. So we need a parliamentarian. 17 What has been requested of us is on 18 402.583, bonds and other security be published in 19 the Texas Registry for formal comment. Is this 20 what you want to do? 21 MS. MATTHEWS: Yes. 22 MS. TAYLOR: So you're making the 23 motion? 24 CHAIR BRACKETT: He's seconding the 25 motion, I think. 0114 1 MR. MANIO: I am. 2 CHAIR BRACKETT: All those in 3 favor -- 4 MR. MANIO: Aye. 5 CHAIR BRACKETT: -- please say aye. 6 MS. MATTHEWS: Aye. 7 CHAIR BRACKETT: Anybody else in 8 favor? Submitting this over for formal comment. 9 So what happens if it doesn't go before -- 10 MR. ATKINS: For the purpose of the 11 advisory committee, if the advisory committee would 12 not have recommended to the Commission this action, 13 I'm guessing that I'll need to go back and regroup 14 with Terry based on the comments that she's 15 received but it still may be her recommendation 16 before with the Commission, so in that case, we 17 would ask that it be placed on the agenda at the 18 time it was placed on the agenda, our cover memo to 19 the commissioners would indicate that it was 20 considered at the advisory committee at this time, 21 that they did not recommend that it be moved 22 forward with the brief, you know, summary of, I 23 guess, some of the issues raised. Then, at that 24 time, it's the commissions decision if they want to 25 move forward or not. 0115 1 CHAIR BRACKETT: Okay. So that's 2 where we stand with this right now. And this is a 3 staff recommendation, correct. 4 MS. SHANKLE: Yes, ma'am, that is 5 correct. 6 CHAIR BRACKETT: Since it's 12:20, 7 this might be a good time to take a lunch break. 8 Can we be back at five after one? Is 45 minutes 9 enough time? So we'll be back in 45 minutes. 10 (Lunch; 12:20 p.m. to 1:20 p.m.) 11 CHAIR BRACKETT: Call back to order 12 this quorum here at 1:20. We'll be taking breaks 13 every hour-and-a-half. We're still on Item three 14 but the subject that we're to is bingo reports. 15 MR. ATKINS: No, gifts certificates. 16 CHAIR BRACKETT: Gift certificates, 17 I'm sorry. 18 MR. GABRILLO: Roy Gabrillo. The 19 first -- First of all, I want to point out 20 something to you and apologize to you, the version 21 that's in your notebook is not the correct version. 22 It's not the most recent draft. I did put the most 23 recent draft out there on your station there. 24 The biggest change in -- from -- in 25 this rule than what's in your notebooks is, for one 0116 1 thing, it's a lot -- it simplified the process of 2 recording that. Any -- the version that's in your 3 notebook contained references to the certificates 4 having to be purchased from a licensed distributor, 5 plus there were also references to maintaining 6 a gift certificate register. 7 All of that language was taken out 8 mainly, again, just to make this process as easy as 9 we could for the organizations to maintain these 10 gift certificates or issue and maintain the gift 11 certificates so I know you haven't had a chance to 12 really look at it but if you've got any questions. 13 CHAIR BRACKETT: It's decidedly more 14 user friendly? 15 MR. GABRILLO: Yes, ma'am. 16 MR. WHITTINGTON: Well, I'm glad, 17 Roy, I got this copy cause this is the copy I'm 18 used to seeing -- 19 MR. GABRILLO: Right. 20 MR. WHITTINGTON: -- and when I saw 21 this book two days ago when I got it through the 22 mail, it was completely different except for the 23 first half page so -- 24 MR. GABRILLO: Right, and I mean, I 25 was insisting to you that this was the version 0117 1 that I had sent to you until Steve presented me 2 with a copy of the e-mail that I had sent out and 3 the attachment so like I said, I do apologize for 4 causing any confusion to you. 5 MS. MATTHEWS: These gift 6 certificates are going to have an expiration date 7 on them? 8 MR. GABRILLO: Yes. In fact, we kind 9 of took that under advisement from what Larry's 10 halls are doing. They issue gift certificates and 11 they, in his case, he said all of his certificates 12 expire on December 31st of whatever year, calendar 13 year we're in so because of the fact that they 14 could sit out there a long time and there is money 15 -- the money isn't really accounted for until those 16 certificates are redeemed and there is a provision 17 in there, it's under F-2, on page 2, Section F-2, 18 lines -- it starts at about the middle of line 6: 19 Funds remaining from expired or unredeemed gift 20 certificates shall be disbursed equittably to the 21 licensed authorized organizations and deposited 22 into the respective general fund account. 23 Mainly because it's not to -- it's 24 not the funds from the sale of those gift 25 certificates are not going to be considered bingo 0118 1 receipts until they're redeemed so that money is 2 just sitting there. It needs to be done -- 3 something needs to be done with that money. We 4 just can't have all that money sitting around so 5 that's what we decided, that it would be placed 6 into the organization's general fund account and 7 then disbursed from there. 8 MS. TAYLOR: I have one question 9 about this on line 8 -- 10 MR. GABRILLO: What page? 11 MS. TAYLOR: Page 1. 12 MR. GABRILLO: Okay. 13 MS. TAYLOR: May not be awarded as 14 prize for bingo. If the gift certificate is, for 15 instance, for a computer, because I know one of the 16 types of bingo, it says merchandise or prizes, what 17 can customers really win when they win one of 18 these with the pull tabs is they win a computer, a 19 dobber and some pull tabs. So does that mean that 20 they can't give them that certificate because 21 sometimes they're already playing bingo and they 22 don't want another computer for that session so 23 they issue them a certificate for the computer that 24 they've redeemed and that's now -- 25 MR. GABRILLO: Then how do you 0119 1 account for the certificate, I mean the card 2 minder? 3 MS. TAYLOR: Show it as -- well, we'd 4 sell -- we do it the same way as a gift certificate 5 where we hold out the $15 because it's good for a 6 $15 computer and the $15 put in on the log and when 7 they come in to redeem their certificate, take $15 8 and then show the sale at that time. So is that 9 something that you wouldn't be able to do anymore? 10 MR. GABRILLO: Well, as far as the 11 gift -- 12 MS. TAYLOR: Because it's like 13 merchandise prize so you couldn't use the gift 14 certificate as a merchandise prize on pull tabs? 15 MR. GABRILLO: Well, for any bingo, 16 card minder, paper or pull tab. 17 MS. TAYLOR: Okay. 18 CHAIR BRACKETT: Are there any 19 questions or comments regarding this -- the new -- 20 MS. MATTHEWS: Well, if the funds 21 from the sale of the gift certificates are going to 22 be set aside -- 23 MR. GABRILLO: Right. 24 MS. MATTHEWS: -- and then they could 25 any -- charities could be -- they could be redeemed 0120 1 against any of the -- 2 MR. GABRILLO: Right, and could be 3 redeemed only within the location that they're 4 playing in. It doesn't matter which organization 5 sold it and which organization redeemed it, it 6 doesn't have to be the same one but it has to be 7 within the same hall where the redemption takes 8 place. 9 MS. MATTHEWS: How are you foreseeing 10 that these funds be maintained separately, on a 11 separate bank account? 12 MR. GABRILLO: No. It's all going to 13 be maintained, you know, for lack of a better 14 word, in like a bank bag or a cigar box, okay, 15 where it's secure. And, in fact, Larry, that's 16 basically your approach, that they're taking at 17 their halls. 18 And, in fact, there's a provision in 19 here where they have to reconcile their gift 20 certificates, at least quarterly, you know, we're 21 saying quarterly, it's probably a good idea to do 22 it on a weekly basis, especially if there's a large 23 volume of gift certificate sales but at least 24 quarterly, and then any -- I'm trying to see if 25 there's -- where it was here that we -- they're 0121 1 responsible for any funds that may be missing. 2 MS. GREENFIELD: Larry, I like the 3 original version better for putting the bingo into 4 the bingo account rather than putting it into a 5 box, the gift certificate fund so we're supposed to 6 put -- you're talking about in this version, you 7 put it aside and -- 8 MR. GABRILLO: Right, right, because, 9 again, the funds won't be considered bingo funds 10 until the certificate is redeemed and that was one 11 of the things that we were -- had considered, we 12 took into consideration because, again, if the 13 sale, the certificate hasn't been redeemed yet, 14 where were those funds going to be placed? I mean, 15 which organization was going to receive the funds 16 for that sale of the gift certificate because -- 17 especially because of the fact that, again, Charity 18 A sells the gift certificate one week and then the 19 individual that got the certificate comes in during 20 Charity B's occasion. Well, Charity A got the 21 money but then charity, you know, Charity A is 22 going to have to turn around and write a check back 23 to Charity B saying, okay, well, this is for a 24 certificate that was redeemed -- that I sold that 25 was redeemed in your -- on your occasion. 0122 1 MS. GREENFIELD: So we're keeping it 2 separate, and then once they redeem the gift 3 certificate -- 4 MR. WHITTINGTON: They've got to be 5 accounted for that day. Well, basically if 6 somebody was to walk up and buy, like say purchase 7 a $1,000 in gift certificates because really, once 8 you print these, there's no cash. It's just the 9 printing cost, and you've got this thousand dollar 10 gift certificate in this bag. Somebody comes in 11 and buys a $100 gift to play bingo and you sell 12 them a $100 and then you take $100 and put it in 13 that bag, then when it's redeemed, then you have to 14 take the cash out and replace that, that to the 15 deposit into that charity's bingo account that day. 16 MR. GABRILLO: Whichever -- yeah, 17 whichever organization happens to be playing 18 when that certificate is received -- is redeemed, 19 excuse me, that organization would then deposit 20 those funds into their bingo account as a sale of 21 paper, card minders or pull tabs, whatever it was 22 redeemed for. 23 MS. MATTHEWS: And what denominations 24 are there going to be? 25 MR. GABRILLO: That's -- we're going 0123 1 to leave that up to the organizations as to how 2 much they want to sell the certificates for. 3 MS. TAYLOR: I think this version is 4 much -- much more of what we were looking for the 5 first time, be nice, easy, simple rule that allows 6 us to use gift certificates. I love those. 7 CHAIR BRACKETT: I do, too. Two 8 pages, that's wonderful. Not having to buy it from 9 someone that's wonderful. 10 MR. GABRILLO: Right. And in fact, 11 Danny and I had a conversation about that yesterday 12 so that's why I apologize again for the confusion 13 on this rule. 14 MR. WHITTINGTON: Well, just like 15 Jody said, too, Jody who works with you, she said 16 point-blank there's really nothing until that money 17 is going into the bingo account anyway. That's all 18 the lottery commission is concerned about, money 19 being put back into the charity account. 20 MS. MATTHEW: Roy, at the end of line 21 12, there's no end to that sentence. 22 MR. GABRILLO: Right, I saw that and 23 it should be -- on page 2, it should be "of the 24 Bingo Enabling Act," and I'll make that correction. 25 CHAIR BRACKETT: Are there any 0124 1 questions on this? All right, then, ready for the 2 vote? 3 MR. FENOGLIO: Madam Chair, there are 4 comments from the floor. 5 CHAIR BRACKETT: I'm sorry. 6 MR. FENOGLIO: There are comments 7 from the floor. 8 CHAIR BRACKETT: I thought you all 9 were just visiting around out there so who wants to 10 speak first? 11 MR. FENOGLIO: Madam Chair and 12 Members, my name is Stephen Fenoglio. 13 In answer to Suzanne's observation 14 and question under subparagraph (c), page 1, line 15 A: A bingo gift certificate may not be awarded as 16 a prize for bingo. This was a discussion point in 17 the subcommittee. There was not a unanimity of 18 agreement on that. 19 I personally believe you ought to be 20 able to give the charity the flexibility to issue a 21 certificate. 22 Now, one of the issues in the statute 23 is, and it was a point that Commissioner Cox made 24 in discussions, and Mr. Atkins was a part of those 25 discussions, that he did not want anyone to have a 0125 1 comp or a free play. 2 And I don't believe, if the committee 3 so chose to give a charity the flexibility to issue 4 a gift certificate as a prize for bingo, that you 5 could also put language in there that would address 6 that in no event can that be for free, number one, 7 and, obviously, number two, if the committee so 8 chose, you could restrict it, you couldn't use 9 bingo funds. If that's what the committee or the 10 commission's ultimate belief was. 11 There was some discussion, well, you 12 can't play bingo for free. And as a general rule, 13 as you know, that's the case but you could charge a 14 penny for it or if it's a regular 12 pack that you 15 give the gift certificate for, you could -- the 16 charity could make the business decision to 17 arbitrarily set a prize for that through the 18 issuance of a gift certificate. 19 One of the things, and I didn't 20 observe this in the House Bill 2519, is actually 21 the language on offering a, or providing a person 22 the opportunity to play bingo without charge, which 23 is Section 2001.413 Bingo Enabling Act, wasn't 24 amended in House Bill 2519, such that it now reads: 25 except as provided by Section 2001.455, a license 0126 1 authorization may not offer or provide to a person 2 the opportunity to play bingo without charge. 3 That 4155 language is the gift 4 certificate language. So you could do that, and a 5 lot of my clients, it's been a healthy discussion, 6 the gift certificate rule, of course, we created it 7 from whole cloth, and there's been a lot of 8 discussion, Roy, among a lot of my clients about 9 whether they want to have the opportunity to award 10 a gift certificate as a prize, and there may be 11 customers that don't want it, and you know, let the 12 market decide would be the point. 13 The other issue, and it was another 14 point of healthy discussion in our subcommittee is 15 if Charity Hall A in South Dallas and Charity HallB 16 in North Dallas are in some way connected, either 17 they've got an agreement where they're going to 18 share marketing information, perhaps, why shouldn't 19 they decide, and they could do that on the face of 20 the gift certificate to say, the gift certificates 21 that are issued at Hall A is only good for bingo 22 product that's at Hall A or Hall B. And, again, we 23 let the market decide whether that's important. 24 And I know we've spent a lot of time with Larry 25 about how his, and I don't mean this in any 0127 1 derisive sense, his halls or the halls that he 2 helps run, if they want to have a joint effort to 3 issue a certificate provided that the other 4 provisions of the Bingo Enabling Act are met and 5 the regulatory provisions, which is you've got to 6 account for it, the money to the extent that you 7 present the certificate, and there has to be money 8 that represents that's deposited into that 9 charity's bingo account by the end of the next 10 business day is met. 11 And that might be a challenge for 12 Patricia Greenfield if she's doing accounting for 13 those charities, to make sure if the bingo money 14 happens to be in North Dallas, or the money 15 representing the purchase of that certificate is in 16 the North Dallas hall, you got to get it to the 17 South Dallas hall by the required reporting period 18 and deposit period. 19 But maybe on that, and I think this 20 was Larry's observation is, let me worry about 21 that. I'll worry about that. Don't let the 22 Lottery Commission tell me how to run my business. 23 And so with that in mind, I think 24 there's a unanimity of opinion from our side of the 25 table that that particular language ought to be 0128 1 narrowly rewritten to allow for the halls that want 2 to do that. 3 One of the concerns that Mr. Gabrillo 4 raised was, well, what happens if this bingo hall 5 issued from Amarillo, issues a certificate, 6 customer happens to be up there and he brings it to 7 Austin River City Bingo and presents it. And I 8 said, well, that would be like -- and I said, well, 9 my hall could choose to honor or not. And it's no 10 different than if the customer happens to be living 11 in Amarillo, comes to Austin and wants to pay with 12 an Amarillo check. We might decide, no, we're not 13 going to accept that check. You bring us cash. 14 You go to the ATM machine or, you know, you figure 15 out, or you've got a debit card now under the new 16 rule, you can pay that way. But we're not going to 17 accept that specie of compensation and that's the 18 way I've looked at the gift certificate rule. Let 19 those halls decide. 20 And it may be, and this was a concern 21 from the staff, that, well, these charities may get 22 taken advantage of by, you know, too many gift 23 certificates being issued are fraudulent, 24 well, that's the case with checks. I mean, there 25 are a lot of problems with hot checks, but let 0129 1 those charities decide how to handle that. My 2 sense is no one is going to rush into gift 3 certificates who haven't already been issuing gift 4 certificates, and there are a number of halls that 5 have. They'll test the waters gradually and 6 they'll figure out what makes sense from their own 7 market. And I would suggest that the language 8 needs to be written to accomplish those two narrow 9 objectives. 10 And I'll be happy to answer any 11 questions. Thank you, Madam Chair. 12 MR. WHITTINGTON: Well, Steve, I 13 wanted to tell you one thing, somebody from River 14 City Bingo comes to Dallas and plays, and they got 15 one of your gift certificates, I'm going to ask 16 them, are they planning on playing the computer, 17 come on in. I'm going to definitely take it and 18 I'll say, hey, we got ten people that'll take it. 19 Come on in, guys. I'll buy it myself out of my 20 pocket and take it back to River City, you know, 21 but yeah. 22 MR. FENOGLIO: Yeah, I mean I'm going 23 to have to pay for it when you come to Austin. 24 But, yeah, I mean, that's the point. Let Larry's 25 hall decide, as long as there's money representing 0130 1 it that ultimately gets into that charity's bank 2 account and the accounting is met. And if the 3 accounting is met, then shame on the charities and 4 I think a woman here in red pants will take care of 5 that issue. 6 CHAIR BRACKETT: Steve, did you want 7 to speak? 8 MR. BRESNEN: Steve Bresnen on behalf 9 of Bingo Interest Group. My comments go to page 1, 10 lines 8 and 9, and I don't see what the evil is of 11 awarding gift certificate as a prize or as a door 12 prize providing it's noncomp. And I mean, sitting 13 here so somebody must have had a thinking -- some 14 thinking about what the problem was so -- I don't 15 know if, Roy, if you're the right person or 16 whoever, but I think as long as it represents real 17 money to the charity, we ought to let them -- let 18 it rip. 19 MR. GABRILLO: Well, the first 20 concern as far as the Subsection C about the 21 award as a bingo prize is, what value are you going 22 to attach to the amount of the prize, and second of 23 all, the prize that lead to the prize fee. 24 I mean, if it's going to be -- is 25 it going to be an arbitrary amount, Steve mentioned 0131 1 about assessing -- I mean, putting a penny value to 2 it. Well, how are you going to collect 5 percent 3 on that so -- and the other -- the other concern as 4 far as Subsection D about the certificate being 5 awarded as a door prize, or using that money or 6 that certificate to purchase bingo equipment, paper 7 pull tabs or card minders and we -- it's always 8 been our stance that any of that cannot be awarded 9 as a door prize. 10 So in essence, using the certificate, 11 that's what the certificate is good for, it's good 12 for the purchase of bingo equipment, which is 13 stated in Subsection A. 14 MR. BRESNEN: So I don't -- I 15 don't know why we wouldn't let it be for a door 16 prize then. 17 MR. GABRILLO: Again, because that 18 certificate will be used to purchase bingo 19 equipment, which, in essence, it comes back to it 20 being used to purchase bingo equipment, that's why 21 it can't be used as a door prize. 22 MR. BRESNEN: Well, I think we're in 23 a circular situation. If you're saying -- I guess 24 what you're saying is, is there a door prize rule 25 that says you can't use the door prize to purchase 0132 1 or you can't give bingo paper or card minders or 2 -- as a door prize, is that the -- 3 MR. GABRILLO: It's not a rule but it 4 is a policy that we have published in the bingo 5 bulletin advising charities that the awarding of 6 bingo equipment cannot be used as a door prize. 7 MR. BRESNEN: I think -- I can 8 understand that when the world was that you 9 couldn't play bingo without charge because the door 10 charge -- the door prize you get without charge, 11 but now we're saying except by use of one of these 12 gift certificates, so to me, it doesn't -- that 13 doesn't really -- doesn't make good sense and 14 besides that I don't see the evil. I mean, these 15 rules ought to be targeted towards a particular 16 evil. 17 As long as the charity gets real 18 money for it and the prize fee, it seems to me, 19 you're requiring down below that the certificate be 20 imprinted with a dollar value, that's what good it 21 is as currency in the bingo hall. So it would seem 22 to me that that would be the basis upon which your 23 prize fee would be collected. Now, granted if it's 24 a penny, you're going to have at least five of 25 those and round up or do some rounding or 0133 1 something, you know -- 2 MR. GABRILLO: Right. 3 MR. BRESNEN: -- but, you know, we 4 have that problem with sales tax collection and 5 that's why the comptroller has to put out, you 6 know, a charge to tell people how much to collect 7 when there's an odd amount out there. 8 I just think it's a restriction that 9 doesn't really address anything that's evil. It 10 doesn't affect the record-keeping. 11 The law says that you got to maintain 12 adequate records. I don't think either one of 13 those really affect that. 14 The prize fee issue seems to be taken 15 care of by the fact that it's imprinted with a 16 dollar value and the issue about whether we're 17 going to give comps or not seems to be addressed by 18 the last line on that page but it has -- it has to 19 have been paid for in full when it's purchased by 20 the customer. 21 So it seems to me that any evils are 22 addressed by the rest of the rule. I would just, 23 without beating this to death, I'd recommend that 24 we just strike lines 8 and 9 and renumber the 25 remaining ones and turn it loose in the market 0134 1 place. 2 MR. WHITTINGTON: Well, I can 3 understand that, Steve, if I was giving where I was 4 at, if I was giving $250 out, then I could turn 5 around and buy $250 in gift certificates and give 6 out assuring myself that this customer is coming 7 back to play in my hall. Of course I'm going to do 8 that. Of course, I understand what you're saying. 9 It makes sense. Goes over there and gives them a 10 $250 cash prize out, just give them $250 gift 11 certificate, put that money in the bingo account. 12 MS. TAYLOR: I'm all with you there. 13 I'd much rather buy a bingo hall gift certificate 14 than a Wal-Mart or H-E-B gift certificate, which is 15 what we do now, because you know the charities 16 ultimately are going to end up with money in their 17 pocket. 18 And the same with merchandise prize, 19 I don't know why would you want us to go to Sam's 20 Club or Wal-Mart, or you know, no offense, Vinny, 21 purchase merchandise prize from distributor when 22 we have our own merchandise prize that is going to 23 create more income for our hall because we're only 24 going to be able to use that in the hall. And if 25 it's a $15 merchandise prize, then they would need 0135 1 to pay the 75 cent prize fee on it, you know, that 2 $15 is taken out because that is a merchandise 3 prize, same as if somebody purchased it. 4 In essense, you're purchasing a 5 merchandise prize in form of a gift certificate for 6 your customer. 7 So I mean, we do that and it's been 8 very successful. So I mean, I -- but I like the 9 short rule, don't get me wrong. I like the short 10 rule but -- 11 MR. BRESNEN: But you're trying to 12 make it shorter. 13 MS. TAYLOR: -- but those -- 14 those are the problems I'm having. Only other 15 thing is that the imprinted with the cash value, is 16 that not something -- I mean, what we have done 17 with the gift certificates, the operator has to 18 write the cash value, like $15, and is that going 19 to be -- I didn't know if you had to be pre-printed 20 because we like to -- we prenumber ours so that, 21 you know, we have consecutively numbered ones and 22 then the operator can do what they need to do with 23 those but those were my only -- those same ones 24 were my concern because we do like these for 25 merchandise prizes and I'd much rather purchase 0136 1 that from charities than 250 for Wal-Mart. 2 MR. BRESNEN: So maybe then line 16 3 could be written to parallel line 19 where you've 4 got a blank, it's either imprinted or has the blank 5 space where you can write it in -- 6 MS. TAYLOR: The same as you do your 7 checkbook. 8 MR. BRESNEN: All I'm concerned with 9 is that, you know, if somebody alters it. 10 MS. TAYLOR: Well, it's the same as 11 if they'd alter your check. 12 MR. BRESNEN: Then you just don't 13 take it. 14 MS. TAYLOR: Well, besides which, you 15 know, the operator has to go into the cigar box and 16 get the little chart out that has the money with it 17 on our little chart that we keep, it says how much 18 the gift certificate was written for. So even $150 19 gift certificate, I can guarantee it, they're going 20 to go look to see if that was 150 before they ever 21 give you any money for your, you know, anything for 22 it, because the normal is ten or $15. I wish we 23 could have a thousand but, you know, ten or $15 is 24 about what people -- ten, 15, $20 is all we ever 25 wrote those for. 0137 1 MR. BRESNEN: My last comment is that 2 I would love to see the cigar box language in the 3 rule. 4 CHAIR BRACKETT: With a rubberband 5 around it. 6 MR. WHITTINGTON: I agree with that 7 rule. 8 CHAIR BRACKETT: Anyone else in the 9 -- anyone else in the public have a comment they'd 10 like to make? Anyone else in the public have a 11 comment they'd like to make? 12 Are you ready to take action on this? 13 All right. The action that we're take would be the 14 BAC recommends to the Texas Lottery Commission a 15 proposal of the Administrative Rule 402.573, gift 16 certificates be published in the Texas Register for 17 formal comment. 18 MS. TAYLOR: I'll make that motion 19 with the deletion of C and D, which are lines 8 and 20 9, on page 1. 21 MR. WHITTINGTON: Yeah. Yeah. 22 CHAIR BRACKETT: So everyone 23 understands the motion of accepted with the 24 elimination of lines 8 and 9 as presented on the 25 draft. 0138 1 MS. GREENFIELD: What about Steve's 2 comments for being able to -- 3 MR. WHITTINGTON: Sixteen. 4 MS. GREENFIELD: Uh-huh. 5 MR. WHITTINGTON: I thought that 16 6 made the comment put the same. 7 MS. GREENFIELD: To be able to move 8 from different bingo halls. 9 CHAIR BRACKETT: Okay. Line 16 on 10 second page? 11 MR. WHITTINGTON: No, first page. 12 MR. FENOGLIO: I tried to write out, 13 Ms. Greenfield, some language that would accomplish 14 my objective and I've not shared it with Roy but I 15 think it, assuming the committee agrees, you start 16 on line 14, pull tabs or card-minding devices 17 unless the location's name accepting the 18 certificate is imprinted on the certificate. 19 MR. WHITTINGTON: Yeah, yeah. 20 MR. FENOGLIO: So that, and I'd still 21 need to modify the language a little bit, I 22 apologize, but so that you -- if going into the 23 deal, if Roy's, or I'm sorry, Larry's three or four 24 halls wanted to issue a certificate that could be 25 presented at any hall as long as it's imprinted on 0139 1 that certificate -- 2 MR. WHITTINGTON: Yes, sir. 3 MR. FENOGLIO: -- then they could be 4 presented and used as a specie to obtain bingo 5 product. 6 MR. WHITTINGTON: Right. 7 MR. FENOGLIO: And in his example, 8 well, if River City's -- a customer of River City 9 shows up with a River City issued certificate from 10 Dallas, then he wouldn't be allowed to accept that 11 because it's not imprinted good on Larry's hall. 12 MR. WHITTINGTON: Exactly. 13 MR. FENOGLIO: And, you know, within 14 all of this, of course, is the hall's still choice, 15 and I want to make sure the rule is clear, that if 16 Larry had a reason to believe that I show up with 17 $500, or what appear to be bona fide certificates 18 with the appropriate names of Larry's halls, Larry 19 looks at them and says, we're not going to accept 20 those, those appear to be bogus, and, you know, I 21 mean, that's a narrow line that the hall would have 22 to work because if the word gets out the 23 certificates aren't good, you know, your customer 24 base will leave and at the same time, be the same 25 thing with a check, you know, I think that your 0140 1 check is bogus, I'm not going to accept it. 2 And I'll be happy to work with 3 Mr. Gabrillo to reach -- if we -- if that's the 4 committee's will to reach some common language. 5 MS. TAYLOR: Okay. I'll amend my 6 motion to include Steve's recommendation and also 7 on 16, line 16, number 2, where it says "Imprinted 8 with a dollar value," change that to say "imprinted 9 or blank space to fill in the dollar value." 10 MR. WHITTINGTON: Yes. 11 CHAIR BRACKETT: Okay. So everyone 12 understands these additions or corrections, 13 changes. Is anybody going to second that? 14 MR. WHITTINGTON: Second. 15 CHAIR BRACKETT: Okay. Larry 16 seconded it. We'll recommend this for 17 consideration or to be noticed for formal comment. 18 All those in favor, please say yes. 19 ALL: Yes. 20 CHAIR BRACKETT: Anyone opposed? All 21 right. Thank you. We need for the record to 22 reflect that Billy Atkins left and that Phil 23 Sanderson is sitting in his place, be fulfilling 24 all the duties therewith. 25 All right. Still on Item number 0141 1 three, we're to the distribution of proceeds for 2 charitable purposes. Roy, are you going to start 3 this report or is Mario? 4 MR. MANIO: Let me say a few things 5 before I'll defer to Norma and to Roy, answer any 6 questions from the public. 7 This is Rule 402.598, in existing of 8 -- there's a half page of rules pertaining to 9 distribution process. 10 What we have in here today is a 11 nine-page document and the reason why it has become 12 so long is, this is one of the more disputed items 13 in the bingo operations, there's a great between 14 the charities and the Commission on what should be 15 allowed on charitable distribution and this 16 document is an attempt to address many of those 17 questions that have risen in the past and hopefully 18 we'll clear them, the ambiguity that have been 19 encountered. 20 Now, this is also an attempt to align 21 the policies regarding charitable distribution. 22 Align the policies of the Lottery Commission with 23 the IRS code. It's not a 100 percent alignment and 24 there are some, you know, the Lottery Commission is 25 more stringent in accepting which will be allow us 0142 1 charitable expenses compared to the IRS. But it's 2 getting to be pretty close to the IRS code. 3 Those of you who belong to the 4 charitable organizations, please make a distinction 5 between 501(c)(3), corporations and the others, 6 like 501(c) 19 and 10. 501(c)(3) is the only 7 organization that will be allowed to make a direct 8 transfer from the bingo account to the general 9 account. 10 In the new code, the distribution 11 would be -- should be made directly from the bingo 12 account and that's probably one of the biggest 13 changes in 402.598. 14 There has been enough discussion on 15 one item, travel expenses. And like the other -- 16 this item, there is no unanimity in opinion about 17 travel expenses. And what they're hoping to 18 accomplish today is get BAC to accept this 19 recommendation for posting of the Texas Register 20 and then we can solicit input from the public 21 pertaining to those travel expenses, which ones 22 should be allowed and which ones should be 23 disallowed. And I'd like to turn it over to Roy 24 and to Norma, so if there's any questions. 25 MS. QUEZADA: Good morning, my name 0143 1 is Norma Quezada, audit manager for the Texas 2 Lottery Commission, and as Mario had mentioned 3 before, because the charitable distribution has 4 been complicated and confusing to some of our 5 taxpayers, they haven't had it in the requested the 6 Commission to be clear on what an allowable 7 charitable distribution is. 8 And with that in mind, the House Bill 9 2519, the BAC subcommittee has attempted and the 10 Commission believes succeeded in writing a rule to 11 clarify the charitable distribution. 12 Some background before we have any 13 questions is that exempt purposes vary by federal 14 tax exemptions; however, House Bill 2519 15 specifically states that bingo funds be dedicated 16 to the charitable purposes of the organization only 17 if dedicated to cause deed or activity that is 18 consistent with their exemption or exempt purpose. 19 Although different nonprofit 20 organizations have different exempt purposes, the 21 organizations must use bingo funds for a charitable 22 purpose. Nonprofit organizations do not have to 23 have a charitable purpose for federal exemption but 24 must have a charitable purpose to obtain a bingo 25 license. 0144 1 The exempt purpose as set forth in 2 IRC Section 501(c)(3) are charitable religious, 3 educational, scientific literary testing of public 4 safety fostering national and international amateur 5 sports competition and the prevention of cruelty to 6 children or animals. 7 The term charitable is used in its 8 general accepted legal sense and includes, relieve 9 of the poor, the distressed or the underprivileged, 10 advancement of religion, advancement of education 11 or science, erection or maintenance of public 12 buildings, monuments or works. Lessening the 13 burdens of government, human and civil rights 14 secured by law and combating community 15 deterioration in juvenile delinquency. 16 To be organized exclusively for a 17 charitable purpose, organizations described in IRC 18 Section 501(c)(3) are commonly referred to under 19 the general heading of Charitable Organizations. 20 This is per the IRS code. 21 Now having said that, are there any 22 questions to the rule? 23 MR. PAVLOVSKY: Norma, is the staff's 24 position that you're going to, or in no event would 25 bingo funds be used to pay for travel expense or 0145 1 meeting expenses under paragraph D? 2 MS. QUEZADA: What page is that? 3 MR. PAVLOVSKY: Seven of nine. 4 MS. QUEZADA: The way the rule reads 5 now, yes, but this is -- this rule is still up for 6 discussion so it's the preliminary rule. We're 7 here to take comments on that. 8 MR. PAVLOVSKY: Okay. So it's not 9 your position that you're going to disallow that? 10 MS. QUEZADA: Well, as it is stated 11 in the rule right now, it is our position. 12 MR. PAVLOVSKY: You can never use 13 bingo funds to pay for those meetings or travel? 14 MS. QUEZADA: That's correct. 15 MR. PAVLOVSKY: Even thought they're 16 associated with a convention or seminar that are 17 solely related charitable functions of the 18 nonprofit and the meetings or conventions 19 discussion would focus on the cause deemed activity 20 that are consistent with tax exempt or federal tax 21 exemptions of an organization, nonetheless you'd 22 never use bingo funds to pay for them? 23 MS. QUEZADA: As the definition of 24 charitable purpose, we do not consider that to be a 25 charitable purpose. The funds to be used for a 0146 1 charitable purpose. 2 MS. GREENFIELD: Don't they do that 3 now, though, where if they go to a seminar or a 4 convention, they are able to say this part of the 5 seminar, maybe 10 percent, I was doing something, 6 you know, for bingo, was a bingo part of it so 7 they're able to use that percentage from their 8 charitable distributions? 9 MR. GABRILLO: Right. Commonly or 10 right now what the auditors are finding when 11 they're doing their audits, when they see travel 12 expenses, all they're seeing is a check to an 13 individual that was written and on the bottom or on 14 the check it'll say convention expense. And 15 there's no back-up documentation to that. 16 The other thing that they're seeing 17 is the check written to a credit card: MasterCard, 18 Visa, American Express, and, again, they write on 19 the check "Convention expense," but there's nothing 20 presented, so that's one of the biggest reasons 21 that we disallow it. 22 But, also, the reasoning behind it, 23 too, is that Section 2 of the Act, I think it says 24 that, you know, bingo proceeds cannot be used to 25 benefit the members. In essence, by reimbursing 0147 1 their travel expenses, it is a benefit to the 2 member. 3 MS. GREENFIELD: But the member is 4 going in order to discuss bingo, which is, you 5 know, for the whole organization and if they 6 can -- 7 MS. QUEZADA: Fund raising is not a 8 charitable purpose. 9 MS. GREENFIELD: Or their charitable, 10 whatever they use the money for but if they can 11 provide documentation other than canceled checks 12 that don't show anything, they can have an agenda 13 that shows, you know, bingo is on it, I mean can't 14 that be used instead of just disallowing it for 15 everybody, can't they just provide more 16 documentation and the people that don't, you 17 disallow it? 18 MS. QUEZADA: Well, we could add if 19 it would be clearer and fair, to add language that 20 would say that unless there is no significant 21 element of personal pleasure, recreation or 22 vacation in such travel, and we can also put a 23 limit, perhaps, on maybe two individuals to go, you 24 know, for three conventions or -- 25 MR. GABRILLO: In a calendar year. 0148 1 MS. QUEZADA: In a calendar year. 2 MR. WHITTINGTON: I just think it'd 3 be more documentation so you all can be precise. 4 MS. QUEZADA: Well, documentation's 5 -- 6 MR. WHITTINGTON: Yeah. Exactly. 7 What they're doing is when they're doing travel for 8 bingo and that should be accounted for so you all 9 would know more so than just a name and I went to 10 so and so, so and so convention 11 MS. QUEZADA: I don't think we would 12 have a problem adding that language to this part of 13 it. 14 MR. PAVLOVSKY: I wouldn't have a 15 problem with you mandating the documentation of the 16 expenses and things like that, but to say, no, it's 17 not going to be allowed, you know, what if my bingo 18 organization chose to pay me expenses to come up 19 here, would that be allowed? Now tell me I'm not 20 -- that I'm not directly -- I'm not going there to 21 talk about anything else, I'm here to talk about 22 what we're talking about. Would that be allowed or 23 not? 24 MR. GABRILLO: Are you talking about 25 directly from the bingo account or as a charitable 0149 1 distribution? 2 MR. PAVLOVSKY: Either one. 3 MR. GABRILLO: Okay. As a bingo 4 expense, no, because it's not related to the 5 conduct of bingo. As a charitable, it probably 6 wouldn't be allowed either because of the fact that 7 it's relating to bingo and not so much as a 8 charitable purpose. It's not -- this isn't a 9 charitable, what's the terminology, activity, deed 10 or -- 11 MS. QUEZADA: Cause. 12 MR. GABRILLO: -- cause. Yeah. 13 MS. QUEZADA: Can you tell me how 14 your being here is charitable? 15 MR. PAVLOVSKY: Yeah, I'm not getting 16 paid for it. The IRS will allow that and the IRS 17 will allow -- 18 MS. QUEZADA: Yeah, and the IRS will 19 probably allow that as an expense and not a 20 charitable distribution -- 21 MR. PAVLOVSKY: I don't care -- 22 MS. QUEZADA: -- for your business. 23 MR. PAVLOVSKY: I don't care where 24 the money comes from -- 25 MS. QUEZADA: Well, the statute for 0150 1 us is that you use bingo for bingo expenses, bingo 2 funds for bingo expenses, and this is not in the 3 conduct of bingo and for the purposes of this -- 4 MR. PAVLOVSKY: What is this in the 5 conduct of if it's not in the conduct of bingo? 6 MS. QUEZADA: I think you're 7 volunteering to be in the BAC committee for the 8 purpose and interest of the bingo society but not 9 -- it's not in relation to the conduct of bingo. 10 MR. PAVLOVSKY: You know, I'm not 11 sure, I -- as a matter of fact, I am sure I don't 12 like the direction that bingo is going in the State 13 of Texas. 14 We're going to run this thing into 15 the ground and we're going to do it to where all 16 the organizations, such as American Legion, VFW, 17 those folks aren't getting any younger. They're 18 not going to pick up a book this thick and go 19 through that and read that thing. They're going to 20 have to hire an attorney to do it and when they do 21 that, there goes all the money. 22 And Chairman Cox, I hope -- I would 23 invite you and the either commissioners to go out 24 into some small town community and watch bingo. 25 You don't have to spend your money, just go out 0151 1 there and watch it. There's a lot more there than 2 just the possibility of winning money. 3 The friendship and comradery of that 4 little community comes together in a bingo hall. 5 And if they got to hire an attorney and a unit 6 manager, and all that other, you know, all these 7 other people, high dollar folks to do the work, 8 there's not going to be any money to send to the 9 state, there's not going to be any money left to 10 give to charities. You understand? Does any of 11 that make sense? 12 (Applause) 13 MR. PAVLOVSKY: Go out here to, you 14 know, Podunk, Texas, somewhere and watch the bingo 15 game and how the folks come together; there's more 16 to it than just this. 17 And if we keep this up, this is how, 18 you know, this is going to be volume one. And 19 no telling how long -- how big volume two is going 20 to be. But if the IRS will buy it and everything 21 else that we -- that we talked about on these 22 rules, we pretty much went by IRS guidelines but 23 yet we get to this one and say, no, no, no, we're 24 not going to do that so -- anybody else? 25 MS. TAYLOR: Yeah, I have a couple of 0152 1 things I'd like to say about this. On page 3 of 9, 2 line 20, is number one: Charitable distributions 3 must be made directly from the bingo checking 4 account. That sounds great but then the second, 5 number two on line 21: Checks written from the 6 bingo checking account to the licensed authorized 7 organization general account; that account is not 8 a charitable distribution. This just -- we talked 9 about unit accounting, all we were ever trying to 10 do when we first brought that up was make it easier 11 for charities to run bingo in their halls. 12 I tried doing that, as Ronnie talked 13 about earlier one time, where the charity didn't 14 have the next session paid the biggest percentage 15 of the bills in the hall but it didn't work. 16 I mean, when time came for charitable 17 distribution the next quarter, we sweated the whole 18 way because since they had paid a big chunk of the 19 bills and they're only allowed the 6 percent or 8 20 percent expenses, there wasn't enough money in 21 there to make the charitable distribution and all 22 the way to the end of that next quarter we worried 23 about it because it backfired on us thinking that 24 the bulk of that session should pay most of the 25 bills. 0153 1 So unit accounting would have been a 2 beautiful thing because everybody would've shared 3 equally in a hall and when you're in a hall 4 playing, you're playing as partners. 5 The customers don't know who's there 6 on Monday and who's there on Wednesday and who's 7 there on Friday. You can't do it the same. 8 If you go to Wal-mart Monday, and 9 they did it one way on Monday, and Tuesday you 10 went, it was a different and Wednesday, it was 11 another way; you wouldn't go back again. 12 So they've got to work as partners in 13 a hall and unit accounting was supposed to be a 14 partnership with the charities. But this makes it 15 so that you can't do unit accounting -- there's no 16 way that Sharon is going to have to time to write 17 out fifty checks from each of these charities for 18 their little things that they do with their 19 charitable distribution money because they might, 20 you know, $50 to the school for something this 21 person's doing and $20 over here and $100 over 22 there; Sharon's not going to have time for all of 23 her charities to do that but if they're not a 24 501(c)(3), religious organization, fraternal 25 organization, you're discriminating against the 0154 1 other people that have bingo licenses because 2 you're making that much, much harder to VFW's and 3 all the veterans organizations don't fall under the 4 easy guidelines where you can make it from your 5 general account. 6 And to say that everything has to be 7 paid from -- directly from the bingo account 8 instead of being able to put it into a general 9 account and disbursing it out like everybody has 10 done since day one, I think, is making it so that 11 unit accounting will never happen in a hall. 12 There's just no way to keep track of all of that. 13 To make sure that when you're going 14 to write a check and you need to make sure you 15 disburse $5,000 before the end of the quarter, 16 you're going to write the $5,000 check, you send it 17 to the charity, that's done. Now it's up to them 18 to disburse it appropriately to the places it needs 19 to be. But now all of a sudden, you've got to make 20 sure that in all these little checks that you've 21 written out over three months, that it equals 22 $5,000. 23 I mean, the work that you're talking 24 about doing, these guys aren't going to do it. 25 They're not going to want to do it and what's going 0155 1 to happen is, when somebody has an opening at the 2 bingo hall and it's a unit, they're not going to 3 let a 501(c) 6 or anybody else in that hall. 4 If they're not one of those three 5 organizations, the VFW wouldn't be welcome anymore 6 to come and play because they're going to mess up 7 my unit accounting in the hall so people aren't 8 going to do it. 9 If they've already got others than 10 the 3's and the firefighters and the religious 11 organizations, they're not going to ever start a 12 unit accounting, which was -- I mean, it was 13 supposed to be just the beauty of being able to 14 finally have equal for everybody in the hall and 15 have all the partners receive a equal share without 16 transferring their licenses, which is what we end 17 up doing. You know, every month everybody has to 18 transfer the licenses around so everybody has an 19 equal chance to make good money. 20 Doing this and making them directly 21 from the bingo accounts is a hardship for all of 22 the -- all of the veterans organizations and 23 they're not going to have a chance because if Larry 24 has an opening in his hall and they're doing unit 25 accounting, he's only going to let those three 0156 1 types come in. 2 I just finished hearing previously 3 how we weren't going to have the religious 4 organizations have to be in business for eight 5 years, everybody was going to be on the same even 6 playing field to get into bingo and to become an 7 authorized organization but now all of a sudden, 8 the playing field is not equal and you're 9 discriminating against the veterans organizations 10 and all the 6's and 10's, and whatever numbers 11 there are out there. 12 So I have a real problem with this 13 rule here because you're making it harder again 14 instead of making it easier and ultimately it's 15 going to affect who ends up being able to play 16 bingo and it's not going to be the veterans groups 17 because they're not going to be welcome at any of 18 the halls. 19 If you turn to page 4 of 9, the first 20 three lines, it's the same thing. I mean, that's 21 what it's talking about. Into the disallowed 22 distributions on 7 of 9, I also wrote down the 23 travel expenses. 24 The charities in my hall couldn't 25 afford to send me over here to these meetings even 0157 1 if somebody was going to pay my way, but for some 2 of them whose charities could afford to help them 3 come to the BAC meetings, I sure see that this is 4 100 percent for bingo, and I don't believe 5 anybody's in here for their personal gain. 6 So to say that that's not a 7 reimbursible expense; if the charities could 8 reimburse it, I mean I would sure think that that 9 would be an expense that should come from the bingo 10 account because this is directly related to the 11 conduct of bingo. If nothing else, it's the same 12 as going to a training class to make sure they 13 connect their bingo games in accordance with the 14 rules and regulations. 15 And one other thing here, is on the 16 next page, it's 8 of 9. I know that we were trying 17 to get away with it, get out of the paperwork, but 18 if you read the first six lines in there, that 19 Sharon and everybody else is doing bookkeeping out 20 there, now they have to fill out another form that 21 shows where every one of those fifty checks for 22 each organization went to when they send in their 23 quarterly report. This seems like a lot more 24 record-keeping and not less record-keeping and if I 25 was a bookkeeping, I wouldn't be -- well, I 0158 1 wouldn't do this for free so I can't see that the 2 fees are going to go down. I can see that this is 3 an increase of fees 'cause not only are you 4 changing how it's done, now you're making them 5 send that in with all the quarterlies so those are 6 my problems with this rule. 7 MS. QUEZADA: Thank you for your 8 comments. 9 (Applause) 10 CHAIR BRACKETT: Any further 11 comments? 12 MR. WHITTINGTON: Yes. I just think 13 deep down inside, this really needs to be looked at 14 and worked again because it's just a lot of stuff, 15 I should say, I think this is the last time we'll 16 get any type of a statement from Texas Lottery 17 Commission as far as BAC meeting, this is -- this 18 is it, right, as far as getting any type of travel, 19 submit or anything? 20 MR. SANDERSON: From travel 21 reimbursement, yes, that is correct. 22 MR. WHITTINGTON: And I do agree with 23 you, Suzanne, if they can afford what -- but this 24 really needs to be looked at it and reworked 25 again, that's my recommendation, is go over it 0159 1 completely, with not only the four people, I think 2 it should be eight or nine or ten people trying to 3 get this straightened out. 4 CHAIR BRACKETT: Okay. Ronnie? 5 MR. HUNTER: On this one line here -- 6 CHAIR BRACKETT: Could you come down 7 to the front so the reporter can hear you. 8 MR. HUNTER: Oh, I'm sorry. 9 CHAIR BRACKETT: And state your name, 10 please. 11 MR. HUNTER: Ron Hunter, American 12 Legion. On line 16 -- 13 MR. PAVLOVSKY: What page? 14 MR. HUNTER: 290, it says there the 15 service organization is going to assist disabled, 16 needy war vets, members of armed forces, their 17 dependents, widows and orphans of deceased 18 veterans. I'd like to see something put in there 19 about the deceased veterans, the VFW, the American 20 Legion, we furnish flags for caskets and they're 21 not allowing it. I guess the veterans don't 22 deserve, I guess, I don't know what they're doing, 23 but if anybody deserves it, they do or you 24 wouldn't be here today. (Applause) 25 CHAIR BRACKETT: You have something 0160 1 to add to the deceased families of -- 2 MR. GABRILLO: We can take that under 3 consideration. 4 CHAIR BRACKETT: Okay. 5 MR. WEBB: Good afternoon, I'm Don 6 Webb. I'm with the AM-VETS, Executive Director, 7 and I would just like to tell all of you that when 8 I send out letters for our meetings which would be 9 in Tyler, Austin, Houston, if they do not send a 10 representative for the AM-VETS and the auxiliary, I 11 will pull their charter and they will not play 12 bingo, and that also goes forth if -- for a 13 fraternal organization, we meet three times a year. 14 I send out letters to them and if they don't 15 respond and if they're not at that meeting, then I 16 pull their charters. 17 And in these meetings we have, we 18 discuss bingo, ways to get more customers and 19 everything else. 20 And like the man said, bingo is not 21 only just to play bingo. They could care less 22 who the charities are. These people come there to 23 unite and play. They've lost their husbands, 24 they've lost, you know, some's lost their wives. 25 They come there and they get together and it's a 0161 1 fun time if you would just come there. 2 They come there early to just play 3 and be, you know, just have a friendship so -- but 4 if they don't respond to my letters that I send 5 them and they don't have a representative, I will 6 pull their charters and they will not play bingo. 7 So it means a lot to have people there to represent 8 their club and their organization. Thank you. 9 MS. IVES: I'll make this short. 10 Sharon Ives, Fort Worth Bookkeeping. I just want 11 to go on the record saying that I totally agree 12 with what Suzanne was saying earlier. 13 In particular on page 3 of 9, line 14 20, 21, and 22, and also on page 8 of 9; is that 15 correct? The first six lines -- I'm sorry, page 8 16 of 9, the first six lines. This would be a 17 bookkeeper's nightmare so I just want to go on the 18 record saying I totally agree with what Suzanne is 19 stating. Thank you. 20 CHAIR BRACKETT: Thank you. Steve? 21 MR. FENOGLIO: I'll go ahead now, 22 Madam Chairman, my name is Stephen Fenoglio. 23 In the first handout is a rewrite 24 with observations or suggestions to the -- I'm 25 sorry, the current rule and then the other form is 0162 1 IRS form 990 and I've already circulated those to 2 Roy and Norma, actually I didn't circulate the 990, 3 I apologize. I've got extra copies but I know you 4 all are intimately familiar with the form 990 since 5 it was our part of our discussion on charitable 6 distribution. 7 I want to start out at 20,000 feet 8 and talk about the changes at House Bill 2519. And 9 it's important to know that the use of proceeds or 10 the language authorizing use of bingo proceeds has 11 changed dramatically from a number of little boxes 12 you had to fit in to basically what the IRS allows. 13 And there seems to be some confusion 14 about this notion, and Pete got into it a little 15 bit with, well, if you're using some bingo money 16 for travel, then that may benefit an individual. 17 The language in the existing Bingo 18 Enabling Act addresses that issue and it's found in 19 Section 2001.002, in the definition section, 20 subparagraph 19: Nonprofit organization, and a 21 nonprofit organization is defined by the 22 Legislature. It's what you think it is. And it 23 provides, it cannot distribute any of its income to 24 its members, officers or governing body so if Pete 25 were traveling somewhere, they couldn't distribute 0163 1 any of that money to Pete if he's an officer, other 2 than for reasonable compensation of services. 3 So if Pete is being compensated on a 4 per diem or a mileage to come to Austin, the 5 nonprofit organization definition anticipates that 6 and the IRS code and accompanying case law is 7 replete with thousands of examples of that. 8 And when we were discussing this with 9 the staff, we kept coming back to what does the IRS 10 allow? And you can see the notebook, three-inch 11 notebook that I've created, IRS, that information 12 for tax exempt organizations, and this is probably 13 a half -- a third of what I've actually read, but 14 the bottom line is what the IRS looks at are two 15 things, and I visited at length with Jason Cox 16 after one of our meetings, as you know he was on 17 vacation for about ten days, he's an IRS agent who 18 is a part of the subcommittee, what does the IRS 19 look at if a nonprofit is getting audited? And 20 they have, if you don't know, the form 990 I've 21 circulated, which is an information return only, 22 and has broad categories. 23 I'm in private practice and it's been 24 a long time but I was audited and I know Mr. Cox, 25 when he was a CPA, just paid a number of audits, or 0164 1 defended audits, and what they look for, for a 2 nonprofit or for a profit individual when they're 3 looking at an expense, basically summarized in two 4 principles, is it -- as far as the expense, is it 5 an ordinary, necessary expense? If it is, you get 6 to go forward. If it's not, you don't get to go 7 forward. 8 And does it have something to do with 9 what the organization is for? And if it is, then 10 you get to go forward; if it's not, you don't. 11 The American Bar Association just 12 ended its convention out in San Francisco and 13 unfortunately I couldn't attend but had I chosen to 14 go to it as a member of the lawyers bar, not the 15 alcoholic bar, although there were a lot of lawyers 16 that were in the bars, I could have written off my 17 travel expenses to go there because it's an 18 ordinary and necessary expense for me to be there 19 and I could have written off 180 or a $300 hotel 20 room; hotel rooms are extremely expensive in San 21 Francisco. But if I had chosen, Larry, to rent the 22 presidential suite at the St. Marks Hotel in 23 downtown San Francisco at $3,000 a night, and I 24 were auditing by that, I can imagine the IRS 25 auditor saying, you know, $3,000 for one night? 0165 1 Yeah, it was a nice room. Three bedrooms. Had a 2 maid. Well, what was your business purpose for 3 that? Well, you know, I was there to try to drum 4 up some business for my fellow bar colleagues, you 5 know, they might need a lawyer in Austin one day. 6 And so I had that room so I could entertain. 7 Oh, did you actually entertain? 8 Well, I had my wife and mother-in-law and our kids 9 there and I meant to invite someone to come up to 10 the room but, you know, I just never -- I got too 11 busy and I never did. Well, you can imagine what 12 the IRS agent is thinking by this point. No, I'm 13 going to give you the, whatever the standard rate 14 is, and you're going to have to eat the remaining 15 cost. That's what the Legislature left us with. 16 Are these ordinary and necessary 17 expenses. So in answer to Pete's question, is a 18 travel expense a permissible expense? The answer 19 is, it depends. And she's going to have to decide. 20 Now, the code is going to give her a 21 lot of help but she's going to have to look at that 22 travel expense. If the AM-VETS organization has a 23 meeting in Dallas and certain members of the 24 AM-VETS organization go to attend and they perhaps 25 use some bingo proceeds to do that, does it -- is 0166 1 it a reasonable and ordinary expense? Is it? And 2 that goes to what's the purpose of the meeting? 3 Does the meeting have anything to do for which the 4 organization was for. 5 If they're meeting up there talking 6 about the betting line on the NFL Super Bowl game; 7 no, that doesn't have anything to do with veterans. 8 If they're talking about the change 9 in law that's coming in congress that affects 10 veterans benefits, and that's one of the reasons 11 the organization was for, then, yes, that will be 12 allowed. That's the IRS standard and that's the 13 standard you're left with, it seems to me. 14 And I think that's a better than a 15 current standard where you never know until you 16 finish the audit whether those expenses. 17 I'll be happy to answer any 18 questions. The Chair has mentioned I've got two 19 minutes left. 20 On the issues that I've raised, some 21 of the changes you can see when I stricken through 22 are language that I'd like deleted or my clients 23 would like deleted, there's some other language in 24 there that I'm not sure exactly what is meant and 25 you can see that. 0167 1 For example, at the bottom of page 1, 2 and that's now ten because my language has added to 3 the length of the rule, this is the rule as it 4 exists, if there's anything in bold in black, 5 that's my question. 6 So, for example, at the bottom of 7 page 25, that's not in the existing rule, that's my 8 flag. What are the direct benefits referring to? 9 And then you can see, for example, at the page 2 10 line 14, I struck through tax exempt, and just said 11 a nonprofit organization and a question there. 12 Finally, as to what the IRS looks 13 for. I mean, you don't have to look any further 14 than the form 990 EZ, and in the form 990 EZ, 15 you'll see they're asking for numbers of -- or 990, 16 form 990, not EZ. EZ is for the smaller 17 organizations gravity wise. Form 990 is for 18 organizations of $250,000 a year or greater. 19 You can see on page 2, part two, it 20 talks about the type of expenses that the IRS wants 21 the charities to discuss or identify. Compensation 22 to officers, directors, et cetera, and you can see 23 that that trigger would occur if there's a large 24 number there. Well, was that for a reasonable 25 expense, ordinary, or was someone getting a 0168 1 sweetheart bonus deal? One of these nonprofit 2 charities that's really not. 3 And then you can see the pension plan 4 contributions, payroll taxes, accounting fees, of 5 course, labor fees. Pete, I appreciate your 6 comment there about lawyers. Supplies, telephone, 7 postage, occupancy equipment rental and 8 maintenance, printing and publications and travel 9 and conventions, conferences and meetings. All of 10 those items of expense are eligible for 11 disbursement by a charity with the charity's funds. 12 And, again, they've got to meet that 13 first standard. And I don't think your rule, the 14 draft rule meets that. This discussion, by the 15 way, there's no surprise to Roy or Norma about 16 this. We've had -- it was heavily contested in our 17 informal discussions about these types of issues 18 and there was not unanimity of agreement. I did 19 agree, it's time to quit talking about it and bring 20 it to the front and try to get a resolution. 21 I've got a number of other legal 22 analysis of the type of expenses that were 23 contested cases, have been authorized by federal 24 courts, one, in particular, that stands out is a 25 parsonage allowance of 15,000 a year has been 0169 1 determined by the IRS to be a bona fide use and a 2 permitted expense of a charity, a church, if you 3 will. 4 They've approved medical expenses. 5 Payments with charitable funds by a charity for 6 medical expenses, for insurance premiums, for life 7 insurance premiums, where the charity happens to be 8 the beneficiary. 9 All of that, I mean, there's a rich 10 history of the type of expenses that are allowed 11 and they all fall under those two broad categories. 12 Thank you, Madam Chair, and I'll be 13 happy to answer any questions or just shut up and 14 go to the back of the room. 15 CHAIR BRACKETT: Steve Bresnen, did 16 you want to speak? 17 MR. BRESNEN: Yes, ma'am. Steve 18 Bresnen here on behalf of the Bingo Interest Group. 19 Let me -- let me go to 20,000 feet, 20 too, real quick. 21 In August of 2001, I came before the 22 Bingo Advisory Committee and told you all that what 23 I was picking up in the world out there was a lot 24 of people getting audited and questioned on 25 expenses that seemed perfectly appropriate and I 0170 1 thought we needed some guidance from the Commission 2 in the form of a rule. That didn't happen. 3 Sometime later I wrote for -- 4 requested by letter a statement by the Commission 5 whether certain expenditures were legitimate. It 6 involved a flag, a reflame ceremony at the tomb of 7 the unknown soldier in Arlington, Virginia, and I 8 was told couldn't give advisory opinions. 9 So we all came back and we started 10 -- we asked for a rule, we asked for a rule, and 11 then we started working on a rule. The Sunset 12 Commission staff recommended, and the Sunset 13 Commission itself, voted to direct the Lottery 14 Commission to clarify the law by rule. 15 The Commission, in turn, voted to ask 16 the Legislature for clarification of the existing 17 statute, which left us to House Bill 2519, which 18 simply says: If you can do it under your federal 19 tax exemption, you can do it with your net proceeds 20 of bingo. 21 Frankly, I think with respect to 22 that, we don't even need a rule. There's lots of 23 law out there. 24 All these charities have been 25 complying with these for -- those rules for at 0171 1 least three years before they get licensed to play 2 bingo. 3 I think the current draft causes more 4 confusion and I think it probably relates a lot to 5 the way it's drafted than it's going to provide 6 clarity. And let me just give you an example. 7 I get the sense in the federal 8 rubric, charitable purpose, that language that kind 9 of label is usually tide to what 501(c)(3) is doing 10 and so I get the sense that the staff seeing 11 charitable purpose in a state statute and is 12 filling that in with the federal definition of 13 charitable purpose and trying to constrain the use 14 of the money in that way, but that can't possibly 15 be because we've got all kinds of organizations 16 that play bingo and have different kinds of tax 17 exemptions that are not C 3's. 18 And the fact is the Texas 19 Constitution says: The net proceeds of bingo shall 20 be used for the charitable purposes of the 21 organizations. 22 It's a state law concept, not a 23 federal law concept. And the only reason to look 24 to the IRS is to say, if you got a volunteer fire 25 department, an abused women's shelter, food, what 0172 1 do you call them? 2 MR. PAVLOVSKY: Pantry. 3 MR. BRESNEN: Yeah, food pantry, 4 whatever it is, whatever exemption you're operating 5 under, if the IRS will let you do that with your 6 money and maintain your tax exemption, you can do 7 it with your bingo money. These questions came up 8 repeatedly: Could you buy the stamp for the -- to 9 put on the envelope to send a scholarship check out 10 or could you only write the scholarship check? And 11 those things were coming up in audits. And so we 12 answered that question by saying -- giving the 13 widest -- the broadest latitude. Let me get 14 specific before my time runs out. 15 If you'll look at the bottom of page 16 2, Subsection C, on line 20, you have to kind of 17 read page 2 and 3 together -- 2 -- yeah, 2 and 3 18 together, but it says a charity can make a 19 distribution to another organization if it's a, 20 quote, charitable organization. Those 21 organizations include, if you flip the page, it 22 gives some examples, the one says that war 23 veterans organization per IRS code. 24 So I can write a check for my 25 distribution to a veterans organization. On the 0173 1 other hand, on page 4, if I am a veterans 2 organization, I can't write a check from my bingo 3 account to my general fund. Unless I'm reading 4 that wrong, that strikes me as absurd. 5 Secondly, there's a lot of stuff in 6 this rule that doesn't have a thing to do with 7 House Bill 2519. 8 For example, operating expenses are 9 mentioned on page 4 at line 4, operating expenses 10 are allowable only for those organizations. I'd 11 like to see a citation to any statute, rule or 12 decision of the Internal Revenue Service that says 13 that operating expenses for other entities can't be 14 paid with their charitable monies. If there is one 15 out there, you'll be able to knock me over with a 16 feather. I think that's wholly imported into this 17 rule and I'm going to be, you know, I may be 18 walking myself way out on a limb here that I'm 19 sawing off behind myself, but I'm going to be very, 20 very surprised if that's the case. I don't think 21 there's any legal basis for doing that. 22 Let me see if I'm leaving anything 23 out. Bottom of page 3 line 21: Checks written 24 from the bingo checking account into the license 25 organization's general account or other account, I 0174 1 think that should be "are not charitable 2 distributions." But there's a verb now in 3 disagreement there. 4 I think that should say or not by 5 themselves, a charitable distribution. We don't 6 dispute that merely writing the check from the 7 bingo account to the general fund of the AM-VETS 8 organization is sufficient. That money has to be 9 expended for a purpose consistent with the tax 10 exemption granted to the AM-VETS organization. I 11 don't think anybody's disputing that. But there 12 seems to be -- there's a recurring theme here that 13 everything's being confined to the bingo account 14 and all the operating -- for example, a -- well, 15 let me -- let me just before my time runs out, back 16 to the operating expenses, or the only 17 organizations that can write a check from the bingo 18 account to their general account being 501(c)(3)'s 19 religious societies or volunteer fire departments, 20 that sure doesn't have anything to do with House 21 Bill 2519. That's somebody's development and 22 invention there. Frankly, I don't think it's legal 23 at all. 24 This, folks, is the primary reason 25 this rule right here, this subject matter, is the 0175 1 primary reason there ever was a House Bill 2519. 2 This is what it was all about. It was to get the 3 agency out of the business of macro managing 4 charitable activities that are private. Churches, 5 veterans organizations, abused women's shelters; 6 none of their business. It's to put it at the 7 widest possible latitude, whatever you can do under 8 your tax exemption, you can do with your bingo 9 proceeds. 10 The objective was to eliminate all 11 this nit-picking that's going on and drive the 12 audit dollars into finding corruption, if it exists 13 out there. And chasing all these gnats is going to 14 take money away from that, lead to endless 15 disputes. As the former president said, this will 16 not stand. 17 Thanks. I'll be happy to answer any 18 questions. And I agree with Suzanne. Thanks. 19 (Applause) 20 CHAIR BRACKETT: Any other comments 21 on this particular -- 22 MR. HUNTER: Ron Hunter, American 23 Legion. It seems like they're discriminating 24 against everybody but churches and fire 25 departments. It looks like the only thing they're 0176 1 afraid of is God and fire. 2 CHAIR BRACKETT: Are you ready for 3 the question? 4 MS. TAYLOR: I'd like to make a 5 motion. I'd like to make a motion that this goes 6 back to another subcommittee to rework on and that 7 we don't consider it any further at this time. 8 MR. PAVLOVSKY: Second. 9 MR. WHITTINGTON: Second. 10 CHAIR BRACKETT: Everyone in favor, 11 please say aye. 12 ALL: Aye. 13 CHAIR BRACKETT: Anyone opposed? You 14 have a lot of material to work with so thank you. 15 All right. Now, we're still Item 16 number three and to the registry of worker's and 17 licensing issues. 18 MS. MORRIS: Madam Chairman, before 19 you proceed, would you like to appoint a 20 subcommittee? You have an existing subcommittee. 21 CHAIR BRACKETT: I think we have a 22 subcommittee. 23 MS. MORRIS: For this one? For this 24 item? 25 CHAIR BRACKETT: Yes. 0177 1 MS. MORRIS: Okay. Thank you. 2 CHAIR BRACKETT: Now, we've been 3 working on all of these -- 4 MR. MINER: I'm Bruce Miner, 5 Licensing Section Manager of the Charitable Bingo 6 Division, and I'll turn it over to Larry to start 7 it off and I'll be available for any questions. 8 CHAIR BRACKETT: Okay. Excuse me, 9 just a minute. We need to take a break right now, 10 I'm sorry. This would be a good time to do that. 11 Let's reconvene in ten minutes. 12 (Break; 2:35 p.m. to 2:47 p.m.) 13 CHAIR BRACKETT: Okay. We'll call 14 back to order. Still on Item three, registry of 15 workers and licensing issues. Go ahead. 16 MR. MINER: Okay. Again, I'm Bruce 17 Miner, the licensing manager for the Charitable 18 Bingo Section and I'll turn it over to Larry to 19 present our discussions. 20 MR. WHITTINGTON: Okay. Subcommittee 21 met on three or four different occasions and we 22 agreed on most of this stuff that's in the BAC book 23 except badges, should I say identification badges 24 for the workers. We went round and round about 25 that question and we could not really come up with 0178 1 an answer because I felt that it's really not 2 necessary and let me tell you the reason why, 3 because I'm looking at the Texas Lottery 4 Commission, first they got to take 20,000 5 applications from the present workers that's 6 working bingo now and date it -- update the file 7 and make sure all of them are current workers. 8 That's going to take a lot of time. And then 9 they've got to assign all these people 10 identification numbers and I just feel by them 11 taking these applications and having identification 12 numbers, that that should be good enough because 13 they've got to send these back out to the bingo 14 halls, to these bingo workers. And I came up with 15 a suggestion, my bingo workers if you send Bruce or 16 Kerry, if they have an identification number and I 17 just put it up in the hall and displayed it, the 18 Texas Lottery Commission everybody got a complaint 19 about something, they can come up to the operator 20 and say, I've got a complaint against Kerry, and of 21 course they've got to pull that photo ID, which is 22 included in this draft. 23 CHAIR BRACKETT: Let me ask you a 24 question. The word group is in consensus on 25 everything that's been presented to us except the 0179 1 badges; is that correct? 2 MR. WHITTINGTON: Yeah, basically. 3 CHAIR BRACKETT: And what's proposed 4 to us does include the wearing of badges; is that 5 correct. 6 MR. MINER: That's correct. 7 CHAIR BRACKETT: Okay. And so what 8 we are doing -- what we're asked to do today is to 9 have this published for formal comment, would that 10 be a better time to consider removing the badges 11 from -- when this is up for formal comment? 12 MR. WHITTINGTON: I don't know. I 13 just thought it should be discussed. I'm sure 14 somebody has some questions about it. 15 CHAIR BRACKETT: Certainly. No, we 16 can present it for formal comment with the notation 17 that there was -- just like you had right here, 18 that there was not consensus on badges. 19 MR. WHITTINGTON: Yeah. 20 MS. TAYLOR: You know my only problem 21 with doing that is that I know we've discussed 22 other things that have gone up and when the rule is 23 finally written and they give a breakdown of the 24 comment that they've received, I don't see on the 25 rule where the BAC comment has been listed on 0180 1 there, and there's been several of the rules that 2 we found -- and I always look to see, well, where 3 is it -- where does it show the discussion we had 4 here and I never see that discussion so it's like 5 this discussion never seems to get as far as I feel 6 like it ought to and that's what worries me about 7 sending on up is if the subcommittee is 8 uncomfortable with the rule. 9 MR. WHITTINGTON: Exactly. 10 MR. PAVLOVSKY: Madam Chair, I have a 11 question, if I may. Bruce, can you tell me how 12 many workers in the last year of the organization 13 that you all have audited, have had some type of 14 conviction that would keep them from becoming a 15 bingo worker? 16 MR. MINER: I don't have an accurate 17 number. We send everybody through and we would 18 continue to do that for background checks, figure 19 out, I would say at least ten a week. 20 MR. PAVLOVSKY: Ten a week? 21 MR. MINER: Yes. 22 MR. PAVLOVSKY: That are prohibited 23 because of -- 24 MR. MINER: Something on their 25 background check that precluded them from, you 0181 1 know, being involved with bingo. 2 MR. PAVLOVSKY: And what percentage 3 of the people would this be that, of the workers 4 that -- of the groups that you audit? 5 MR. MINER: It's a small percentage. 6 I mean, we're talking less than 1 percent but 1 7 percent of 23,000 people is a fair number. 8 MR. PAVLOVSKY: Yeah. 9 CHAIR BRACKETT: So are these 10 felonies? 11 MR. MINER: Or moral turpitude, how 12 you say that or define it, it's been ruled on that 13 those items addressed in the Act would prohibit 14 them from being involved with bingo so I just want 15 to make clear, we're not adding any new actions, 16 you know, we do the background check, we continue 17 to do that. We have all these names captured on 18 our current system. 19 This House Bill requires us to make 20 it readily available to the industry to make sure 21 that that person is currently registered and we 22 discussed that in detail, and the area of most 23 discussion was whether a badge or not was required, 24 so we're doing all the work anyway so the 25 additional step of providing a badge was to provide 0182 1 a visible documentation, number one, to show when 2 they expire so it will be something readily visible 3 to indicate that in three years, which we discussed 4 that register might expire. When is consistency 5 for standards. 6 I'll accept for Larry may run a very 7 professional hall and he has taken care of all 8 these areas of concern, but I can assure you the 9 whole industry doesn't do it the same standard as 10 Larry so we wanted to provide a standard for that, 11 that allows individuals to capture a name of 12 somebody that provided poor service or we're doing 13 something illegal. Again, Larry's hall has names 14 on the shirt but a lot of them don't, so we just 15 want to provide a standard format to provide all 16 the information that we think would be beneficial. 17 MS. GREENFIELD: Can I make a 18 comment? One of the things that you still have to 19 do as a charity is you've still got to check the 20 registry so just because they have a badge doesn't 21 mean that they're okay to work. And even with the 22 badge you also -- if the auditor or whoever, I 23 mean, the security, they still don't know that that 24 badge belonged to that person so they're still 25 going to probably request a photo ID, and that's 0183 1 kind of what I had a problem with it for was, you 2 know, why have the badge. You're going to have to 3 photo ID and you still have to check the registry. 4 And it's now going to cost the bingo worker $5 in 5 order to have the badge so those were the problems 6 that I had on that. 7 MS. MATTHEWS: Is the $5 a new thing? 8 It's never cost anything in the past. 9 MR. MINER: we never had it in the 10 past so this House Bill says we can identify a cost 11 to cover reasonable administrative expenses so that 12 was a figure picked. 13 We do three background checks on an 14 individual over the three years, that would be $3. 15 We discussed in detail, you know, well they lose 16 the badge. It's not that expensive for us to go 17 ahead and give them six badges on a perforated card 18 stock to keep, that's twenty cents per sheet. So 19 $5 seemed reasonable. I mean, I can find out an 20 accurate capture of the time spent -- to your 21 favor. 22 MR. WHITTINGTON: So how many -- got 23 over twenty something thousand, right? 24 MR. MINER: We currently have 23,000 25 workers and operators identified active on the 0184 1 system. This might cause them to purge some of 2 those because you may not identify 160 workers for 3 the church just in case. They might consider 4 streamlining that to the people they actually need 5 and make them reliable. 6 So that may be a cost savings there. 7 Instead of sending out 40,000 names per year, it 8 might be reduced. 9 MR. WHITTINGTON: Well, what I was 10 telling you and what we discussed over and over, 11 the badge thing that you got in your hand, why 12 can't that be displayed in the hall in a glass case 13 where it never moves, where all the workers that 14 you have working in the hall, that way they never 15 get lost. Everybody has their badge on the wall. 16 Texas Lottery Commission, you can check somebody. 17 If somebody got a complain, they can easily go to 18 that person and say, well, and it'd be so much 19 easier and more so and a lot less work. 20 MR. MINER: Per our discussions, we 21 started at the very extreme and we backed off and 22 we had photo ID's, I mean, photo pictures and stuff 23 so we checked the industry. Many of the states 24 don't require registration because they say all 25 workers will be volunteers so that didn't apply to 0185 1 us. 2 We looked at other states that it 3 required registration and fingerprints and badges, 4 just kind of picked up on who was it, the Texas 5 Racing Commission, and they required everybody to 6 be licensed, whether you are the food service, 7 whether you're the janitor, whether you're the 8 vendor that delivers the Cokes to vending machine 9 that's at the race and their license fees start at 10 $15. So we thought this was a reasonable 11 compromise and we felt we could accomplish it. 12 MR. WHITTINGTON: But you know, 13 still, again, like Pete was saying earlier, I mean, 14 bingo is a place where people come, some workers, 15 some of them voluntary on a voluntary basis, some 16 of them are as a worker, a contract worker. And 17 bingo has been going on for so long, people have 18 been working at bingo, I understand they need to be 19 registered, that's fine, fill out registration form 20 out and you'll need to update your database and I 21 firmly believe that you all got to go with this 22 badge and ID number on persons working in a bingo 23 hall, which you all have on your database. Why 24 can't it be displayed with names and ID number in 25 the hall without even being touched. Everybody can 0186 1 have these in the hall of all their workers on the 2 wall. And, you know, it'd be done with. 3 And of course the badge would be 4 there, everything be there, without them putting 5 it on. 6 MR. PAVLOVSKY: I can understand why 7 they have to wear the badge, Larry, I mean, you 8 may be in there playing bingo, you don't know who 9 I am and you can just look at my name tag if you 10 have a complaint. 11 Bruce, I want to ask you another 12 question, please, sir. Doesn't 2519 say that the 13 Commission is to provide a form so the people can 14 prepare their own badge? 15 MR. MINER: Not prepare their own 16 badge. 17 MR. PAVLOVSKY: Or to prepare an ID 18 card? 19 MR. MINER: Right. So we take that 20 as to be an application, to get registered, we're 21 required to identify the form of the badge. 22 MR. PAVLOVSKY: Could you do that on 23 a -- just put it on your web site and let somebody 24 download the -- 25 MR. MINER: We discussed that. Based 0187 1 on guidance from security, they wanted photos and 2 one extreme and we didn't want to make it too 3 readily available that you could download it, it'd 4 be black and white and everybody could make a copy 5 and it would not be a accurate reflection, so this 6 was our middle of the road approach so it's 7 considered all these and discussed them -- 8 MR. PAVLOVSKY: But it doesn't say in 9 2519 that the Lottery Commission must prepare that 10 ID, does it? It just says that they've got to make 11 a form available. Am I correct? 12 MR. MINER: Which part are you 13 talking about? 14 MR. PAVLOVSKY: It'd be in 2519 15 somewhere. I don't have it -- I just made some 16 notes. 17 MR. MINER: Under 314 B, I'll just 18 read it. I haven't even looked at it for this 19 purpose. 20 The Commission shall provide the 21 identification card and shall provide form to be 22 completed by a person that allows the person to 23 prepare the identification card. The Commission 24 shall collect the reasonable charge to cover the 25 cost. So we've taken the position that the 0188 1 application form and we're providing identification 2 card repleted six copies by replacement in case you 3 -- and we would assume it would be just an easy 4 slip into the holder. These cost 15 cents, 17 5 cents, so you have 50 of them at the hall, it might 6 cost $8.50, so it's not a prohibitive expense. 7 We have done everything we could to 8 facilitate the process through amending and 9 updating applications and providing the 10 notification forms and assisting you in identifying 11 as to the changes, changing the supplement form to 12 capture the registry number. There's been a lot of 13 work into getting prepared and sending out the 14 license, it was not the most difficult. 15 MS. TAYLOR: I have a couple of 16 things that I wanted to say. 17 This -- this rule reminds me a lot of 18 the gift certificate rule. You know, we asked for 19 a gift certificate rule and when we got it, we were 20 all in shock because of how -- how many pages it 21 was and how much was involved in there. 22 I know that when we started our 23 little wish list, that we said we would like there 24 to be a registry of bingo workers because it would 25 make it easier for the charities to commit to bingo 0189 1 and that was one of the things on the wish list, 2 but if I could take it off the wish list right now, 3 I'd do it in an instant because I've read through 4 this and I'm totally -- I mean, confused reading 5 through this line: If there are workers that just 6 started, you need to post their application on the 7 wall and this is really so involved for something 8 that was supposed to just be easy, make it easy on 9 the charities. 10 MR. MINER: We considered all that 11 and part of the problem was, you can be an operator 12 and a conductor at every location but then you have 13 to comply with a part of the Act that says you must 14 be a member, so some of the language talks about 15 getting an amendment because you can't be a -- 16 MS. TAYLOR: Is there -- what do the 17 people selling lottery tickets at the convenient 18 stores, how are they registered? Do they wear 19 identification? 20 MR. MINER: I haven't got a clue. 21 MS. TAYLOR: Are they registered? 22 Does anybody know? I don't recall ever seeing 23 anything on any of those people that sell me 24 lottery -- I don't buy them but at the convenient 25 stores, I don't see all of that, and it seems like 0190 1 we make bingo so much harder. The lottery is so 2 big and we're so little, I don't know why we make 3 everything so hard. 4 MR. MINER: I've got a -- 5 MR. PAVLOVSKY: Excuse me. 6 MR. MINER: -- the hard part -- we 7 have to do all the hard part. We have to capture 8 all this information so the part that we were 9 having discussion over is whether we're going to 10 provided a badge. 11 MS. TAYLOR: That makes it hard, you 12 know, the identification badge must be visible. 13 What if the girl's got long layer and it's covering 14 her identifcation, now are we going to be in 15 trouble because her identification badge is 16 invisible? I mean, it just seems like it makes it 17 so difficult, everything here. 18 MR. MINER: Well, I have it in my 19 car; well, you didn't really have it in your car, 20 you didn't have one, so it's -- it was just a 21 convenient because of the potential for abuse. 22 MS. TAYLOR: I mean, still when you 23 go into the hall, you tell them I want to know the 24 names of all these workers and then you look on 25 your list and you see if these people are indeed 0191 1 somebody that is on their list. That's the way -- 2 I mean, whenever you all have come in to -- that's 3 how you've done it. 4 MR. MINER: Right. 5 MS. TAYLOR: Then you have the right 6 to ask any of those people to prove they are who I 7 just finished saying they are. So it just seems 8 like it makes it so difficult. If you don't have 9 your badge, you can't work, you can get in trouble. 10 If you send somebody new and they don't have a 11 badge, you have to post their application on the 12 wall. I mean, it just -- it just seems like 13 there's more and more to do all the time. 14 MR. MINER: Well, part of the 15 application on the wall was related to -- I don't 16 disagree that it's become more complex 'cause all 17 we wanted to do was provide you a single supplement 18 form with seven signatures on it and you can change 19 the worker with one document but we didn't get that 20 done before this was put out. 21 MS. TAYLOR: So even, in your 22 opinion, this probably -- could something be done 23 to make this a little easier? 24 MR. MINER: What, the whole registry 25 process? 0192 1 MS. TAYLOR: This rule that we're -- 2 proposed rule that we're reading today? 3 MR. MINER: I think it's the best 4 hand -- 5 MS. TAYLOR: That you could do up at 6 this time? 7 MR. MINER: -- and that we were dealt 8 with. Because Larry brought up the point, well, 9 when I send in a supplement for a worker, they can 10 start working immediately. Well, this doesn't 11 allow that. You have to be registered. Well, 12 there's a process time, a mailing time. So we 13 wanted to consider that so you could not be the 14 sole worker, cashier caller, you could be a 15 trainee, so we're giving you a window of 16 opportunity. 17 So that's where that came in to allow 18 you to utilize those people more quickly because of 19 the process time. So, yeah, on paper it looks more 20 complicated but we were trying to address some of 21 the concerns. 22 MS. GREENFIELD: Well, in the act it 23 says that the Commission may require a person to 24 wear that identification badge, it doesn't say that 25 they have to, so we could totally get rid of the 0193 1 identification badge, just go with, you know, the 2 worker gets sent a letter, here's your I.D. number, 3 and do it the same way we've been doing it. 4 Another thing I'd like to mention, 5 when I saw this at first I was really excited too 6 because I thought, okay, now the charities don't 7 have to send in these workers anymore. The workers 8 responsibility, then all we have to do is go check 9 on the web site or whatever and they're okay to 10 work. Well, they didn't get rid of it. Bruce was 11 telling me, they didn't get rid of it in the Act so 12 the charity is still required to send in, on their 13 supplement form, all the workers, so it's an added 14 thing that is going to be required now. 15 MR. PAVLOVSKY: Can we table this and 16 send it back to the committee? 17 CHAIR BRACKETT: Yes, if that's what 18 the group -- 19 MR. SANDERSON: If the only -- 20 the only comment is that the identification card, 21 is that my understanding from the subcommittee? 22 MR. MANIO: I have a couple of 23 questions but why not the sending it back to the 24 subcommittee where they propose the language to the 25 registry, I don't know, but let -- 0194 1 MR. WHITTINGTON: Go ahead. 2 MR. MANIO: Okay. Let me go back to 3 the text of the rules, the draft. On the first 4 page in the middle of the page, you have item 5 number three, manager, and I was searching the 6 Bingo Enabling Act looking for a manager and I 7 couldn't find it. 8 House Bill 2519 has a reference to a 9 manager in the section on bingo worker but I was 10 wondering if that's in reference to the unit 11 manager in unit is different so this is a brand new 12 position that's not in the code. 13 MR. MINER: That's correct, we -- no, 14 it's not. It is in the code. Our interpretation 15 was to specifically address the unit manager, we 16 find this manager to possibly be a hall manager, 17 maybe Larry needs to be identified. 18 MR. MANIO: All right. I have 19 several -- I'm sorry, go ahead. I have several 20 concerns about the creation of this position 21 manager. 22 Number one, it's an extra overhead, 23 that the charities probably cannot afford right 24 now. 25 Number two, how do we handle this 0195 1 person. He is not listed in the, you know, in 2519 2 under the Section 2001.459, allowable expenses. 3 The section is allowing for -- is allowing fees for 4 callers, cashiers and ushers. There's no mention 5 of a manager in there, so how do we pay the salary 6 of this person? These are questions I -- 7 MR. MINER: Those managers are there 8 already, so, you know, whether they're paid 9 positions or they're currently identified as an 10 operator for the charity, I don't know but there 11 are those laws that, you know, they work for the 12 hall and they help organize and we tried to 13 identify define it fairly to address who they are 14 and all we wanted to do was, it seemed reasonable 15 that if they weren't already captured on the 16 charities, we captured them for background check 17 because I guess you really wouldn't have to 18 identify them if they weren't the owner of the hall 19 or they weren't on one of the charities but they 20 still would be responsible for running the 21 operation. 22 MR. MANIO: Right. Now, the other 23 concern I have about this is, I read through the 24 functions of the manager and there is a great deal 25 of overlap of the -- difference of the operator. 0196 1 MR. MINER: Absolutely. 2 MR. MANIO: So we might have some 3 redundancy in here? 4 MR. MINER: Sorry, what? 5 MR. MANIO: There might be a 6 redundancy in this position because he's going to 7 be taking over some of the functions of the 8 operator. 9 MR. MINER: We just tried to address 10 what people are currently doing in the industry, 11 so, you're right, our preference would be for the 12 primary operator who's responsible for the license 13 to do all these. 14 MR. MANIO: And that would be my next 15 concern. If we want to really make this -- 16 operator or the alternate operator, we should 17 probably not the manager position. 18 MR. MINER: It's identified as a 19 position in House Bill 251919 so we felt 20 appropriate to define it. 21 MR. MANIO: Well, those are some of 22 the questions in my mind that we, you know, that we 23 send this back if we are going to sent this back to 24 the subcommittee, it's something that you might 25 want to resolve. 0197 1 And then on page 5 of 6, in the 2 middle of the page, section, small letter L, an 3 authorized organization must confirm a person is 4 listed on the registry of approved charitable bingo 5 workers. 6 And the question in my mind is, for 7 whom is the confirmation going to be made? I mean, 8 after the confirmation, so what? Who gets notified 9 about the confirmation, or if we don't do the -- if 10 they don't do the confirmation, who's going to be 11 offended? 12 MR. MINER: If you as a charity are 13 using someone that is not registered, you're in 14 violation of the act so this will just reiterate in 15 the importance of verifying that they're 16 registered. 17 And then what we're hoping, you know, 18 is that you check the register. You don't just 19 check the badge, you don't just check the 20 confirmation letter we send you, because that's not 21 requirement in the bill. The requirement of the 22 bill is you be on the registry so -- 23 MR. MANIO: So you're leaving -- 24 addressing the issue here of before employing a 25 person, we need to confirm with the registry that 0198 1 he's registered? 2 MR. MINER: Absolutely. 3 MR. MANIO: I'm confused. 4 MR. MINER: Well, in the House Bill, 5 it says you will not use anybody unless they're 6 registered, so all we're saying is check the 7 registry to make sure they're registered before you 8 submit them, so then on the supplemental forms that 9 we capture from you, you're going to have a 10 registry number, which we will have provided to 11 them, eitehr through confirmation or through the 12 license, actually both, that you could just put on 13 the supplement so -- 14 MR. WHITTINGTON: Well, you know, 15 we're going to have a registered worker throughout, 16 and of course a lot of the stuff, as you know, 17 Bruce, I didn't agree on, especially the badges and 18 this is going to be here and we're going to have 19 this and we just need to simplify it and make it 20 workable for us, that's what we need to do. 21 CHAIR BRACKETT: And you're referring 22 to simplify the badge? 23 MR. WHITTINGTON: Well, no, simplify 24 the whole thing. 25 CHAIR BRACKETT: The whole rule. 0199 1 MR. WHITTINGTON: Yes. 2 CHAIR BRACKETT: Okay. So -- 3 MR. BRESNEN: Madam Chair, it might 4 be helpful since some of us were involved with the 5 legislation, if we went back to that 20,000 foot 6 level and explain why this was done and I think 7 this can be done simply. 8 CHAIR BRACKETT: Do you want to come 9 forward and do that? 10 MR. BRESNEN: Yes. My name is Steve 11 Bresnen and I'm here on behalf of the Bingo 12 Interest Group. 13 Let me give you a little background. 14 Our wish list had the registry on it. The purpose 15 of the registry was to allow someone who was on the 16 registry working any bingo hall without having to 17 file supplemental forms because people were getting 18 into a trap, their lists weren't updated and 19 accurate all the time, even though the person was 20 perfectly eligible to work. 21 The object was to have a central 22 location, a web site or by telephone or fax, that 23 you could verify somebody's -- the fact that 24 someone had been approved to work in the conduct of 25 Bingo. 0200 1 Now, the staff, Mr. Atkins, had a 2 draft that was a full-blown licensing regime, with 3 fees, the authorization for the agency to determine 4 the moral fitness of a person to work in a bingo 5 hall, and was about five or six pages of statutory 6 language. 7 We negotiated with them. The primary 8 concern was people who work in a bingo hall getting 9 in trouble or doing something wrong in one place, 10 getting fired, going down the street and working in 11 another bingo hall and no one for the Commission to 12 be able to address that problem of people who were 13 cheating or stealing or doing something wrong out 14 there. 15 So we made a compromise and the 16 compromise was you had to be on the registry to be 17 able to work. 18 Now, the staff also wanted to have an 19 identification badge and we were in agreement with 20 having the identification badge as long as you 21 didn't have to get it from Austin because people 22 are going to lose the identification badge and when 23 they do, and they're going to run through this six 24 extras, and we were fine with the agency providing 25 one if they wanted to, but we also stuck the 0201 1 language in that said that the agency shall provide 2 a form that allows the person to create their own 3 badge. So let me put it as simply as I can. 4 Right now, we have people who are 5 approved to work in a bingo hall. Put them on a 6 web site. Put them -- do a simple document, put it 7 Adobe Acrobat, put it on the web site. Somebody's 8 working in your hall or wants to work in your 9 halls, scroll down the document, find their name, 10 if I was I'd check their ID card to make sure it 11 was actually that person. Let them go to work. 12 That's simple. 13 Now, the badge, we were willing to 14 accept the use of the badge provided a hall could 15 buy a stack of forms where when the person 16 inevitably showed up without their badge or they 17 left it at the hall, the previous hall they worked 18 at, or the dog ate it, they could fill in their 19 badge. They could clip it on when a commission 20 person came in or a player wanted to identify a 21 worker, they'd be able to say, okay, there's your 22 badge. 23 If a commission employee comes in, 24 they can ask them for ID to make sure that the 25 badge corresponds to who it's supposed to. Again, 0202 1 simple. 2 The statute does not authorize a $5 3 registry fee. What it says is, the Commission can 4 recover its cost for providing the badge or the 5 forms. 6 So our concept was and what was 7 negotiated, we represented before to the staff was 8 that you could do it one of two ways: If you 9 wanted a nice laminated official-looking badge from 10 the Lottery Commission, you could get it from 11 there. Or, you could order a stack of forms and 12 have them sitting in the hall there and when the 13 person showed up without their deal, you could say, 14 huh-uh, you can't work without your badge and I'll 15 go over there and fill out your badge. Again, 16 simple. 17 Now, in keeping with my theme of 18 driving the money into the audit function to find 19 corruption, I'm going to make myself sick of saying 20 that, but if we're going to be accused of 21 corruption, then we ought to drive the money into 22 finding the corruption. 23 So what we're going to do here now is 24 going to -- we're going to send apparently a 25 written confirmation that the person's been 0203 1 approved. That will cost a 37 cent stamp for every 2 written confirmation that goes out, plus the 3 envelope, plus the form, plus employee time. Why 4 not just put it on the registry? 5 If it's on the registry, if I've 6 applied and I'm waiting -- I know my name's got to 7 be on the registry, and only approved names are on 8 the registry, I'm anxious to go to work, I'm going 9 to be checking the internet all day. Or I'm going 10 to be working that fax machine or calling and 11 finding out, is my name on there yet, is my name on 12 there yet, and if I was y'all, I'd print that page 13 on the registry when you see the name come up 14 because that will change some. 15 So I think we've taken something -- a 16 lot of this really isn't required by 2519. This is 17 like the gift certificate rule, it could be a lot 18 simpler. 19 And, frankly, I want to credit Bruce 20 for having made some huge improvements in this from 21 the first draft that went out. And, Larry, and all 22 of y'all on the subcommittee, believe it or not, 23 this is a very big improvement. 24 Bruce had the disadvantage that he 25 wasn't sitting in the negotiating sessions of the 0204 1 Capitol building with Representative Forest Staff 2 and Steve and I and Bill Hewitt and other people 3 while this was being worked on, so there's some of 4 these things that he couldn't possibly know. I 5 didn't serve on that subcommittee so I apologize 6 for my untimely explanation about how we got here. 7 But, for example, on page 3 of 6, 8 item G 2, line 16, this definition of bona fide 9 active member, that's got zero to do with House 10 Bill 2519. 11 And as I read the statute, the 12 supplement is not in the statute. It says when you 13 file an application, you list who's going to work 14 and when the Commission determines that the people 15 who are going to work are -- don't have criminal 16 background, then it issues your license. 17 Now, I may be wrong about that but, 18 and if I am I'll stand corrected, but I think our 19 intention was to do away with the supplement so the 20 universal reference point for approved workers was 21 the registry. It was intended to be simple, save 22 money and keep people out of traps. 23 So the money that the agency spent, 24 money that you spent complying with the law, could 25 go to charities and the money that the agency 0205 1 spends making sure these supplemental forms are 2 right, wouldn't have to be spent that way anymore 3 and it could be spent ferreting out, you know, 4 waste, fraud and abuse, and the other bad words. 5 I don't think the statute says that 6 until you get your card -- it says: A person that 7 is considered registered may begin acting as a 8 worker or operator only if they receive written 9 approval from the Commission. 10 Again, I think that's too high cost, 11 let me just hit my other points real quick here and 12 I'll -- replacement badges, shouldn't have to get 13 those from the Commission. All of this Item number 14 six, on page 4, line 17 through 29, is just 15 surplus. That ought to just be knocked out of the 16 rule, as far as I can see. Maybe there's some 17 other basis that somebody can explain. 18 On page 5, at line 29, I don't think 19 the statute lets anybody operating under a 20 temporary license that doesn't also hold an annual 21 license out of the requirements of using workers on 22 the registry. I gather there are some of those 23 folks out there, why we allow people to use 24 unapproved workers in those organizations or that 25 are not on the registry, I don't know. 0206 1 And I don't know what O and P are 2 about. First of all, under P, it seems to say that 3 the charity has to tell the Commission within 4 thirty days after a change of status when someone 5 is no longer serving as a work. Or if you can go 6 to any hall and work, how are you going to know? 7 If somebody tells Larry, Larry, I 8 can't stand you anymore, I'm going over to work in 9 Bishop's hall, how are they going to know. They're 10 over there working across the street so Larry 11 can't be under a duty to inform somebody that 12 there's been a change of status because he doesn't 13 know. 14 And the other thing here, register 15 workers must be listed on a form or by other 16 approved electronic means within 10 days of the 17 worker, acting in their capacity. I'm not sure if 18 that's a complete sentence or not, but the bottom 19 line is, if you're on the registry, what's to 20 submit? You're registered, you're regsitered. 21 You're good to go. 22 I agree that I think this needs a lot 23 of extra work, except for one thing. The agency 24 needs to have a registry up and running because the 25 statute does require that people be on the registry 0207 1 to work. So I would encourage that the agency do 2 the simplest thing possible, don't try to integrate 3 with a fancy database, don't do anything you don't 4 have to do. Put a list up there, scan it in, do 5 whatever you have to do and don't be acrobatic and 6 put it out there and hope that everybody has an 7 Adobe reader or can download the free version and 8 that'll be from your Lottery Commission web site. 9 That part seems to me does need to be done. 10 The identification badge, I think it 11 may help some people. And we were willing to go 12 with the Commission on that. We were also willing 13 to go with the Commission's ability to remove bad 14 actors. You know, we were doing this while other 15 people were accusing us -- the industry of being 16 corrupt, we were over there trying to take care of 17 corruption. So I'm sorry it got a little more 18 complicated than we started out on our wish list 19 but there was a reason for doing and I hope that 20 explains it. I'll be happy to answer any 21 questions. Thanks. 22 CHAIR BRACKETT: Anybody have any 23 comments they want to make or -- 24 MR. HUNTER: I have one question. 25 CHAIR BRACKETT: Okay. Ronnie. 0208 1 MR. HUNTER: Ron Hunter, American 2 Legion. If all this is going to be put on a 3 computer, it's got -- only about 20 to 30 percent 4 of all the organizations have a computer. How are 5 they going to pull it up unless they call? 6 MR. MINER: That is our immediate 7 work around it is to respond to telephone calls 8 because of the programming requirements and access 9 that would be needed for the web. 10 So to address Steve's concerns, we 11 will have something out there available, updateable 12 and -- but our primary initially, will -- because 13 through the phone conversation if you want to 14 confirm your individuals because programming 15 required to capture all this information and move 16 it over just time did not permit. 17 So I do want to touch on one other 18 thing though that Steve was commenting on. We 19 would like nothing more than to get away from 20 supplements but we interpreted 3001.102 B 12 21 where it says: The licensee must provide the name 22 and address of each person who will work at bingo 23 occasion. So we felt like we had to something at 24 that. 25 MR. BRESNEN: Not to get into it, I 0209 1 don't want to be in a debate here, especially with 2 Bruce who I adore and think does a fabulous job, 3 but what that section says is the -- what it says 4 is, the application must include the name and 5 address of each person who will work. 6 The application is in reference to 7 the license application. I believe the supplement 8 is something that the Commission is requiring in 9 its discretion in order to keep its files updated, 10 and that's worked fine. It had a purpose, to find 11 bad people that shouldn't be out there involved in 12 bingo. That's the purpose of the registry is to 13 supplement all that so if that's in another 14 administrative rule, I'm sorry, I don't have my 15 total command of all of that but if it's another 16 administrative rule, that rule needs to be amended 17 or repealed in order to fix that part of it. 18 If there's a part of the statute that 19 requires a supplement that I'm not up to speed on, 20 let's look for discretion in it so we can get rid 21 of all those things. 22 The object of 2519 is to streamline 23 things, make them more simple, reduce the cost to 24 the licensee and the agency, and those should be 25 the guiding principles in everything we do and take 0210 1 the savings and do what with it? 2 CHAIR BRACKETT: Find the bad guys. 3 MR. BRESNEN: Find the bad guys. 4 MS. TAYLOR: One more thing. One of 5 the things that I didn't like is all the postings. 6 I mean, I wouldn't mind but it says you have to 7 have -- if you send somebody into the registry, you 8 need to have that in your file because that's the 9 norm you're going to have it in a file, but to keep 10 posting all this stuff all over the walls all the 11 time, nobody reads. There's too much stuff on the 12 wall. How much do you read when you go to Maverick 13 market? You know, you don't read all of that so 14 what is that there for? If you've got it on your 15 file, that this person has been submitted, it 16 should be in your files, but all the posting stuff 17 is what I take exception to. There's too much on 18 the walls already. 19 MR. MINER: Take a look at that. 20 CHAIR BRACKETT: Whether there's too 21 much on the walls or not, I feel like posting -- 22 you're posting some things that are private, very, 23 very private and very confidential, date of birth, 24 social security number. 25 MS. TAYLOR: Driver's license. 0211 1 CHAIR BRACKETT: Yeah. It's just 2 really kind of spooky to be doing that so -- 3 DAVID HEINLEIN: I'm David Heinlein. 4 This whole point is what Steve has said to get this 5 registry, we want this for three or four years and 6 we've been talking about it and so now we've got it 7 and House Bill 2519, it's great and the whole idea 8 was to not have to send these supplemental forms in 9 and -- 10 CHAIR BRACKETT: Can I interrupt you 11 a minute and ask you a question because of the 12 clock on the wall and that we're on Item number 13 three on the agenda -- 14 DAVID HEINLEIN: We have how many 15 more to go? 16 CHAIR BRACKETT: Would you like to 17 suggest that this be sent back and reworked and 18 reconsidered at the next bingo advisory? 19 DAVID HEINLEIN: Yes, but I had a 20 point to make that I think is relevant that I want 21 to make. 22 CHAIR BRACKETT: And all of the 23 discussion today will be considered in the rework. 24 MR. HEINLEIN: Irregardless of 25 whether we send this back, we have September 1 0212 1 coming up on us and I just know -- 2 CHAIR BRACKETT: My goodness, that's 3 more than thirty days away, why are you worried 4 about -- 5 MR. HEINLEIN: What are you talking 6 about, that's ten days away, not even ten. 7 Anyway, I'm thinking of a problem 8 here. I just know that yesterday I had a license 9 renewal on my desk to look at and the lady that 10 handled that account said, you know, I submitted 11 all of these names last year when we did the 12 license renewal because they were missing. I've 13 sent supplements all through the year and here I 14 have a license renewal, none of these names are on 15 it. 16 It started striking me that you're 17 going to get this list published in a few days and 18 I'm going to find all these people that working in 19 our halls aren't even on the list, and yet I know 20 that we've sent them in. 21 The truth is we never get a 22 confirmation that they've ever gotten what we sent 23 to them. What I do get is if somebody has been 24 questioned, they've got a background check that 25 they need to check out. Then we get a letter, we 0213 1 get a message, but when I get one of those, of 2 course I know that's a particular supplemental form 3 that did get received because one of them got 4 rejected but how do I know that any of the rest of 5 them ever got put on the list? 6 So now after at this meeting, I'm now 7 concerned that September 1, all of our workers may 8 not be on the registry. 9 MR. PAVLOVSKY: Want a motion? 10 CHAIR BRACKETT: Yes, sir. 11 MR. PAVLOVSKY: Move we send it back 12 to the subcommittee. 13 MR. MANIO: Second. 14 CHAIR BRACKETT: It's been moved and 15 seconded that the issue of registry of workers and 16 licensing issues be sent back to the committee. 17 All those in favor, please say aye. 18 ALL: Aye. 19 CHAIR BRACKETT: Any opposed? But we 20 do want to thank you for your work. You have done 21 some good work. 22 MR. SANDERSON: Madam Chair? 23 CHAIR BRACKETT: Yes. 24 MR. SANDERSON: Since the majority of 25 the subcommittees promote this and the charitable 0214 1 distribution rule are present today, I'd like to 2 see if the Chairs of those subcommittees would 3 contact their members and see if we could get some 4 meetings scheduled to iron out these differences or 5 whatever needs to be looked at under two rules so 6 that we can move forward with this. 7 CHAIR BRACKETT: All right. Get them 8 scheduled today. 9 MR. SANDERSON: Not necessarily meet 10 today but get set -- 11 CHAIR BRACKETT: No, I didn't mean 12 meet today. 13 MR. SANDERSON: -- get -- yeah, 14 get together to where they can check their, you 15 know, might can get together and say, well, we can 16 meet next week or something of that time frame. 17 CHAIR BRACKETT: Okay. So the door 18 is locked and you all can't leave until you have a 19 meeting set. That's agreeable, I'm sure. Everyone 20 wants to move on with this. 21 What is your pleasure at this point. 22 How much longer do you want to continue? I know 23 people have planes to catch -- 24 MR. PAVLOVSKY: I can do two reports 25 very quickly. 0215 1 CHAIR BRACKETT: All right. We will 2 depart from the order of business as it's printed 3 and distributed and where are we moving to, Pete, 4 would it be eight? 5 MR. PAVLOVSKY: Item eight. 6 CHAIR BRACKETT: Eight. Okay. 7 MR. PAVLOVSKY: Jack Dougherty and I 8 and Norma are on that committe to do a bingo player 9 survey, the staff has done a tremendous job on 10 that. You all really don't have to sit down 11 because this is not going to take long. They've 12 done a tremendous job, bingo division got subject 13 to a 100 and 74 halls participating inner data from 14 3,546 surveys, as opposed to 11,000 that were 15 mailed. 16 Dr. Liz Jambor is analyzing all of 17 this and there are six or eight eye charts in your 18 book that defines the difference in the -- in all 19 the areas of question, the age, the income, race, 20 sex, the whole nine yards. And there's a lot of 21 information that's going to be -- that you get to 22 get out of there. I was talking too Billy earlier 23 this afternoon. 24 One of the things that Jack had asked 25 me to ask y'all was, I think you planned to or had 0216 1 thought about and y'all had talked about possibly 2 two more surveys. He was thinking that if we could 3 combine those to one -- 4 MS. QUEZADA: Pete, let me interrupt 5 you, I don't real think that we have a number as to 6 number of surveys. 7 MR. PAVLOVSKY: Okay, okay. 8 Well, and again, Norma, we're going to make this 9 quick because I'm going to be out of here in about 10 five minutes and I've got one more to do and I 11 apologize for cutting you all short but I mean, if 12 the committee wants to discuss it further, that's 13 fine, but Jack had asked me to report on it a 14 little bit and as Madam Chair said in the interest 15 of time we may want to put this back on if agenda 16 for our next meeting. But if you all had -- excuse 17 me. If you have anything, I guess real quick that 18 you can share with us, I guess go ahead. 19 MS. QUEZADA: Okay. I -- I -- you 20 pretty much covered, I think there was no surprise 21 as to what the average player was in Texas, overall 22 average state player, which was a married Caucasian 23 female over 66 years old, who is a high school 24 graduate and earns between ten to 4.9 per year. 25 However, with the data, and I'm going 0217 1 to let Dr. Jambor continue this issue as far as 2 what the results that she can come up with, with 3 the data that we did capture. 4 MS. JAMBOR: What you've got in this 5 report very quickly is just the preliminary of what 6 a statewide individual who plays bingo is. What 7 we'll be able to report at another date is 8 specifics within a region, within a class, what 9 differentiates a male player versus a female 10 player, agewise, ethnicity, all of those so that we 11 can -- we'll be able to better define what makes a 12 difference so that when we look at your player 13 base, you'll be able to say, this is what my player 14 base is like, it's how I know what that specific 15 player base likes or doesn't like when it comes to 16 bingo. 17 MS. QUEZADA: Like, for example, 18 Virginia, in Lubbock, you have the younger crowd 19 because of the University there and -- 20 MS. JAMBOR: There may be some 21 significant differences that you can address with 22 that young crowd and hopefully attract those people 23 into the bingo halls that maybe it's not happening 24 right now for them. 25 CHAIR BRACKETT: I just read an 0218 1 article about college students being very addicted 2 to gambling so -- 3 MS. JAMBOR: We don't want to do 4 that, we want to go just short of that. 5 CHAIR BRACKETT: That's the first 6 thing I thought of but we have advertised in the 7 Texas Tech University newspaper too so, yeah, we're 8 trying to. I know y'all you don't want to hear 9 this but we did have -- when Tech played, turned 10 out it was a honorary sorority of dance students 11 and it was darling cute girls, you know, they were 12 at this table and they had decided before they came 13 that any money they won, it would be used for their 14 organization. Well, one of them bingo'd for $750, 15 they jumped up and they screamed and they ran 16 around the table and all of the, you know, all the 17 old time players were like, tell them it's not the 18 way you behalf. 19 MS. JAMBOR: But that's something you 20 can then promote to other similar groups because 21 having taught there, I know they're always looking 22 for an easy way to make money. 23 MS. QUEZADA: Have a college night 24 bingo or something. 25 MR. PAVLOVSKY: Thank you, ladies, we 0219 1 appreciate it. We look forward to the rest of the 2 information. 3 CHAIR BRACKETT: And we do keep the 4 Red Raiders on our big screen TV's. 5 MS. QUEZADA: There you go. 6 MR. PAVLOVSKY: That's all I have on 7 that item. Can we go back to 12, please, ma'am? 8 CHAIR BRACKETT: Yes. 9 MR. PAVLOVSKY: This is a smoking 10 issue. Terry Shankle put this book together. This 11 has to do with smoking versus nonsmoking. If you 12 want it, you know, it's about as interesting as 13 reading a phone book but there's a lot of -- there 14 is a lot of good information, I'm just kidding you, 15 Terry. It's not -- the background, this came up 16 and Billy appointed a committee and we looked into 17 it. There's nothing we can do as far as smoking 18 versus nonsmoking. That is a local issue and you 19 have to go to your city council to solve the 20 problem. End of report. Thank you, ma'am. 21 MS. SHANKLE: Thank you, Pete, that 22 was great. 23 CHAIR BRACKETT: Now, Pete knows how 24 to give a report, right? Come on up if you want to 25 make some comment, sir. 0220 1 MR. HUTCHINGS: May I speak to that? 2 CHAIR BRACKETT: You certainly may. 3 MR. HUTCHINGS: Good afternoon, my 4 name is Charles Hutchings. To the contrary, 5 there's quite a bit that can be done. 6 We or the Commission, or through some 7 process through this Commission, could go to the 8 Legislature and entertain much like the pawn shops 9 have done, where there has to be a zoning in every 10 city for pawn shops to be in. 11 In other words, the city cannot just 12 say a pawnshop cannot be in a city. They have to 13 furnish some zoning for that pawnshop. 14 There could be something in the bingo 15 legislation that says, you know, and we would have 16 no problem, I don't think anyone in the bingo 17 industry, with having a split deal, where you have 18 a smoking section, not the old nonsmoking section, 19 but a smoking section separate ventilation, you 20 know, the whole deal, but this could be done, you 21 know, if one can be done, the other can be done. 22 It can be done through the legislative process. 23 Right now there is lawsuits over this 24 stuff. The one in Dallas, there's a lawsuit there. 25 And other things are taking place to try to change 0221 1 it. But as far as this thing is, the bingo 2 industry in the State of Texas needs to look at 3 this and see what they can get through the process 4 and through the Legislature to prevent the cities 5 from coming in and just totally wiping out the 6 smoking in bingo halls. 7 I passed out a circular today showing 8 what has happened to the bingo halls, or the 9 charities and the bingo halls in Dallas that I'm 10 associated with and how it has destroyed their 11 financial base. 12 And, you know, everyone in Dallas is 13 facing the same problems, we really need to see 14 about getting some type of legislation through the 15 next Legislature to prevent that or it's going to 16 take place all the way across the state. Thank 17 you. 18 CHAIR BRACKETT: Thank you. 19 MS. MATTHEWS: Virginia, I think we 20 could go through these audit rolls in a couple of 21 minutes, too, unless there's a lot of public 22 comment. 23 CHAIR BRACKETT: Are you talking 24 about Items 4, 5 and 6? 25 MS. MATTHEWS: Uh-huh. 0222 1 CHAIR BRACKETT: Yeah. Billy 2 requested that we take those up when he's here. 3 MR. SANDERSON: No, he wants us to 4 take them up today. 5 CHAIR BRACKETT: Oh, he wants them 6 taken up today. I'm sorry, I misunderstood you. 7 MS. MATTHEWS: Hurry through them. 8 There are three audit rules. The general audit 9 rule of books and records, inspection rule and the 10 compliance review. We are requesting that you 11 recommend to the Texas Lottery Commission that 12 these be published for formal comment. 13 MS. GREENFIELD: I think I have one 14 comment on this. 15 CHAIR BRACKETT: Okay. Go ahead. 16 MS. GREENFIELD: On page 2 of 5, it 17 says a summary of charitable activity is form 18 request, list of all charitable with in audit 19 period, and I would like to not have that included. 20 I don't think -- we just started doing it when they 21 started out sending forms to -- 2 of 5, I'm on -- 22 I'm on line 7. 23 DAVID HEINLEIN: Are we on books and 24 records inspection? 25 MS. GREENFIELD: No, on the audits. 0223 1 General audit rule. 2 MR. WHITTINGTON: Page 2 of 5. 3 MR. GABRILLO: The reason for that 4 form is we're trying to capture information as to 5 how charitable proceeds are being used, a specific 6 use, because there have been times where Billy has 7 been contacted or asked by the legislators asking, 8 well, what percentage of proceeds is used for 9 education, what percentage of proceeds is used for 10 social welfare, and this is just a tool that we 11 were trying to use to capture that information. 12 That's it, because of the fact, again, right now we 13 have nothing we don't have a database, we don't 14 have any information to provide to the legislators 15 when that question is posed to the Commission. 16 MS. GREENFIELD: Well, can we do it 17 through the audit when the auditor's actually 18 working with the charity and maybe he's got his 19 computer in there going through, you know, what 20 they spend. Instead of making the charity have to 21 sit down and do a list on a piece of paper, maybe 22 they can work together on it. 23 MR. GABRILLO: That's fine, the 24 auditor can do that, the only problem is that it's 25 going to take the auditor additional time to do 0224 1 that. 2 The downside of that is that a lot of 3 times the -- we get complaints from the charities 4 saying that the auditor is taking too much time to 5 do this audit. 6 So if the auditor is having to sit 7 there and to data enter or handwrite, depending on 8 if he's got a laptop or not, then they're going to 9 have to handwrite this information down. The 10 organization is going to have to understand that 11 it's going to take additional time to do this. 12 MS. GREENFIELD: I don't know how 13 anybody else feels about it but -- 14 MS. MATTHEWS: Could we give them the 15 option? 16 CHAIR BRACKETT: What I would like to 17 know is, what do you mean by summary of all 18 charitable activities? Like would you say two 19 words, emergency or -- three or four words, 20 emergency shelter for abused children, and that 21 would be it? 22 MR. GABRILLO: The format that's sent 23 out contains information like what activity, what 24 the activity was, how many persons were served, the 25 date of the activity, there's other specific 0225 1 information in there so that's -- and then while 2 it's also classified by charitable, medical, 3 fraternal, benevolent, there's different codes that 4 are assigned to the different charitable 5 activities. 6 MS. MATTHEWS: So in your case, there 7 would be just one activity, wouldn't there? 8 CHAIR BRACKETT: Right, but -- 9 MS. MATTHEWS: And mine as well. 10 CHAIR BRACKETT: -- the number of 11 days and people that changes hourly sometimes but 12 anyway -- so anyway, that is fine. 13 MS. TAYLOR: When the auditor is 14 performing the audit and they are making sure that 15 the funds have been distributed correctly, at that 16 time don't they find a list or some idea of what's 17 been done with the charitable funds without asking 18 the charities to make a list? I mean, you all are 19 checking that out anyway to make sure everything 20 matches, right? 21 MR. GABRILLO: They do a general -- 22 if they put the money into the -- if the money goes 23 into a general fund, they do a general fund 24 analysis where they have to go through and weed 25 through what money is from bingo, what money is not 0226 1 from bingo, what expenses are not, and which are 2 charitable. I'm not aware -- and I'm not aware of 3 -- and each auditor will probably do it different. 4 Some auditors may be very detailed and write all 5 that, you know, log all that information down, 6 other auditors may just classify it by a 7 noncharitable and charitable and just have numbers. 8 So maybe we could, we probably could 9 make a change in procedure where it is a detailed 10 analysis where this form would not have to be 11 filled out, but I mean, I guess that's something we 12 could consider. 13 MS. TAYLOR: The auditor is looking 14 at it anyway so it seems like it'd be easy for him 15 to -- 16 MR. GABRILLO: But at the same time 17 it would expedite the audit if the auditor has that 18 information already available and the auditor can 19 just verify that information. 20 It's the same thing with the 21 quarterly report. The amounts that are reported on 22 the quarterly reports as far as sales and expenses, 23 that's all the auditor is doing is verifying those 24 amounts so that form is already prepared for the 25 auditor, all the auditor has to do is come in and 0227 1 just verify those amounts and if those were proper 2 uses of charitable funds. 3 MS. GREENFIELD: So can we make it 4 optional? Just make it out if the charity feels 5 like they want to do that, they can fill it out, 6 otherwise the auditor could take a little bit 7 longer and produce those? 8 MR. GABRILLO: I mean, we can 9 consider it. We can consider that. 10 CHAIR BRACKETT: Okay. 11 MS. IVES: Sharon Ives. Good 12 afternoon, my name is Sharon Ives, Fort Worth 13 Bookkeeping. 14 Just to let you know, I was on the 15 subcommittee and also I commented several times on 16 this particular line, on page 2 of 5, regarding the 17 charitable summary. I feel it's a lot of work on 18 the charities as well. 19 As a matter of fact, we just went 20 through an audit less than a month ago to where 21 right now this is voluntary. The form does not 22 have to be filled out. It's not mandatory. This 23 particular organization that just went through the 24 audit a month ago filled out the form. 25 The organization is a fire 0228 1 department. They had to list on that summary the 2 date, the check number, who the check was to, what 3 it was for, the amount, how many people it helped. 4 This was for gasoline purchases for the fire 5 trucks. 6 So it had to help not only Tarrant 7 County but if the fire department got called for a 8 backup on one of the surrounding counties, you had 9 to include the population for whatever county that 10 is. So, yes, it is time-consuming. I don't feel 11 it's necessary for the organization. I think it 12 should be left as an option. Thank you. 13 CHAIR BRACKETT: Any other comments 14 on that? 15 MR. FENOGLIO: Yes, Madam Chair, my 16 name is Stephen Fenoglio. This rule needs to be 17 addressed and scrubbed. The history on this rule 18 is it was proposed by the staff and it was pulled 19 down by the staff back in, and you have the history 20 in your notebook of, I believe it was February or 21 so of 2002, and the reason it was pulled down is 22 because it increases the costs and burdens on a 23 charity unnecessarily, at least that's my view. 24 I testified at length at a special 25 hearing on this and the rule has not changed. One 0229 1 of the things, and if you don't know, the staff is 2 now considering either 19 new or amended rule 3 makings and Suzanne has talked a little bit about 4 the additional rule record-keeping that this rule 5 would require and I wasn't even aware they'd 6 promulgated a form but it seems like it's capturing 7 a whole lot more information than is actually 8 necessary to make a report to the Legislature. 9 You can also get that information by 10 doing a survey without the formal nature of an 11 audit rule. 12 As a part of the rule-making process, 13 you will notice in the general audit rule that 14 they're going to incorporate GAAS. Generally 15 Accepted Auditing Standards. I filed an open 16 records request to get a copy of GAAS and I never 17 got one from the Lottery Commission. They told me 18 I could actually go get one at the University of 19 Texas but their only copy of GAAS at the time was 20 on loan, in about six months perhaps I could get -- 21 the copy would come back. And I actually finally 22 got a copy of the students' GAAS guide. 23 It is 300 -- in true accounting 24 fashion, it's -- they're not paginated but you can 25 see it's about two and a half inches thick, it's in 0230 1 excess of 300 pages. 2 Part of this rule incorporates GAAS. 3 This is what a student, an accounting student at a 4 University would use to understand GAAS. The way 5 the rule is drafted, the charities will have to 6 understand it. Suzanne, are you ready to 7 understand the student guide? I don't think so. 8 The other thing that the draft rule 9 requires is a commission, it establishes and adopts 10 by reference a standard on the bingo audit 11 references and procedures manual, and that's page 1 12 of 5, subpagraph B, the general provisions and, 13 again, references GAAS. 14 I've reviewed at length when this 15 rule came up, the manual. It's about three inches 16 thick. I understand it's been revised. But, 17 again, that audit is going to be conducted in 18 conformance with that, which means the charities 19 are going to have to be knowledgeable about those 20 standards. There's no reason for that. 21 This agency has been auditing 22 charities since April of '94 without an audit rule. 23 Roy and his staff, I believe, have developed the 24 type of data they need and they ask for it from the 25 charity, and obviously most of it centers around 0231 1 the use of the bingo funds and the bingo accounts. 2 And I don't have a problem at all 3 with the lottery asking for that data and for 4 telling my client's charity, you've got to produce 5 it, but they don't stop there. They want all the 6 general fund data. 7 And in the case of River City, all 8 five agencies or charities were audited about a 9 year about and a half ago, and as a part of their 10 audit, they wanted the entire general fund records, 11 which the draft rule allows them to obtain. 12 Family Elder Care, as I mentioned 13 earlier, a three and a half million dollar budget. 14 For one calendar year, all of their general audit 15 records were in excess of 30,000 pages, and the 16 auditor said we want to review those. 17 Now, if you can't want to produce 18 your originals, you can send us copy. My response, 19 as their lawyer was: No, you can come down and 20 look at the records. We'll make a room available. 21 We'll make a copier available. You can tell us 22 what you want. Well, no, we want them in our 23 office. Okay, well, we'll send them out to Kinko's 24 copies and it's about 7 cents a page, so if you 25 give us a deposit, we'll get the copies made. No, 0232 1 they didn't want to do that. 2 The way the rule's drafted now, if 3 that charity happens to be in Amarillo, Lakitha 4 Shrine comes to mind, the regional office is in 5 Odessa, that's a 240-mile drive, so if the charity 6 says we don't want to let go of our original 7 records, records get lost, this agency has lost 8 records, I don't mean to be critical but records 9 gets lost, and if it's your general fund records, 10 you better darn sure make sure you have them 11 available. 12 So you're going to pay, the charity 13 will pay under the draft rule for the auditor to 14 come visit. Why? These charities contribute about 15 20 million dollars a year to the state over and 16 above what it costs to regulate bingo. Shouldn't 17 the Lottery Commission pay for that auditor to go, 18 if the charity decides no, we're not going to 19 allow, and some charities may say, well, it's a few 20 hundred pages or maybe a thousand, we'll go ahead 21 and copy them and send them. But the way it is 22 now, it's mandatory. I don't think that's fair or 23 I don't think it's right. 24 And that's one of the reasons this 25 rule was sent withdraw. Now they've brought it up 0233 1 at the last possible moment when you've got 12 2 other ideas on your plate to try to get, in my 3 view, a rubber stamp, to get this up to the 4 Commission. It needs a lot more work. It demands 5 a lot more work. 6 There are a number of other holes in 7 the rule that will lend itself to a lot of 8 litigation on my part, and my children thank you 9 for that, but the charity should be using that 10 money to where the rubber meets the road, not to 11 pay a lawyer or a consultant, like David Heinlein, 12 to try to comply with this arbitrary nature. 13 One of the other things, and this 14 came up with both the ARK and Family Elder Care. A 15 lot of the records of those two charities are 16 confidential, highly confidential by contract with 17 the state or federal government because they're 18 agencies under contract with those agencies. They 19 can't produce those general fund records, yet the 20 auditor insisted that all the general fund records 21 be available. 22 Ms. Brackett's charity in Lubbock, 23 they have confidential records. They can't produce 24 them. 25 There's no provision in the rule to 0234 1 recognize that, but there's a sanction if the 2 charity doesn't produce those records. 3 Now, I'm happy to say that under the 4 audit that occurred, we negotiated those issues 5 out, but absolutely we could be sued, those 6 charities could be sued, and the officers and 7 directors could be sued, if they allow those 8 confidential records to be viewed, even perhaps by 9 an auditor. And we weren't able to work with the 10 auditor on that. 11 Once you got a rule in place, you 12 don't necessarily get to negotiate that any longer. 13 On the exit conference aspect, and my 14 testimony, Madam Chair, when we had this come up 15 before was about two hours, as I recall, but -- 16 DAVID HEINLEIN: Hour and 45 minutes. 17 MR. FENOGLIO: I'm sorry? 18 DAVID HEINLEIN: Hour and 45 minutes. 19 MR. FENOGLIO: Hour and 45 minutes. 20 The exit conferences are very arbitrary deadlines. 21 They're talking in terms of ten days. 22 Typically, I get hired at or about 23 the time of the exit conference. You have to 24 produce your answer within ten working days of them 25 giving you your exit, their draft exit or audit 0235 1 report. There's not enough time to hire me or 2 someone like me to understand what the issues are 3 to prepare a response or to prepare additional 4 records. It's all set up, I don't believe 5 intentionally, but it's all set up for a charity to 6 be a failure in this audit process. 7 They worked well for nine years 8 without an audit rule. I think they would work 9 well for another nine years without putting these 10 arbitrary limits in, and then the agency has the 11 club over the charity's head; if you don't do it 12 the way we want you to, A, pay us money, or B, we 13 can take your license because you refused to 14 produce the records at all or on a timely basis. 15 I'll be happy to answer any 16 questions. 17 CHAIR BRACKETT: Does anyone have any 18 questions? Okay. Are you ready to take action on 19 this? You wanted to make a motion, Marilyn? 20 MS. MATTHEWS: Okay. I move that the 21 BAC recommend this new rule to the Texas Lottery 22 Commission. 23 CHAIR BRACKETT: Okay. All of you 24 heard the motion? All those in favor, please say 25 aye. I'm sorry, I keep forgetting my second. 0236 1 Actually if something comes from our committee, you 2 don't have to have a second but if you all want 3 second, does someone want to second that? Is it 4 going to die for lack of a second? 5 Okay. We'll move on then to Item 6 number four. 7 MS. MATTHEWS: Now, can we put this 8 off, we're running out of time? 9 CHAIR BRACKETT: I'm sorry, 10 number five. What, Marilyn, I'm sorry, I 11 interrupted you? 12 MS. MATTHEWS: I thought this would 13 go a lot faster. Maybe we should leave this till 14 next time. We've got two more audit rules to 15 address. I'm going to have to leave in about ten 16 minutes. 17 CHAIR BRACKETT: I need a suggestion, 18 what is it you want to do? 19 MR. SANDERSON: Well, at least the 20 three 590, which is I guess the one you just voted 21 to, or there was no vote, and 592 and 596 have -- 22 they've all been out in the informal comment period 23 for quite some time, and I don't know if, you know, 24 the discussion on the other two, 597, 596, are 25 quite as detailed as 590 so I don't think those 0237 1 will take very much time to address. 2 MS. TAYLOR: Let me ask you a 3 question. Since we didn't second that last one and 4 therefore it would show no vote, is it just going 5 to show that the committee decided not so say 6 anything about it? Because if so, then I would 7 like to go back and second that motion so that we 8 can show how the committee felt about that rule? 9 So how does that show up when there's no action 10 taken by the committee? Does it just say no action 11 by the committee? 12 CHAIR BRACKETT: It would be better 13 to have action. 14 MS. TAYLOR: So I would like to -- if 15 we could go back to that, I'll second that motion 16 so that we could take a vote. 17 MS. GREENFIELD: Well, do we want to 18 send it back and talk about it again? 19 MS. TAYLOR: It will go -- it will go 20 forward is what I'm afraid of saying we took no 21 action on it. But if that being the case, I'd 22 rather say that, you know, we also didn't like it, 23 then it shows that we didn't take any action on it. 24 MS. GREENFIELD: -- we don't want it. 25 MS. TAYLOR: Right, and we don't want 0238 1 it. Rather than no action at all, looks like we 2 would be denied. 3 DAVID HEINLEIN: Can I just make one 4 comment? 5 CHAIR BRACKETT: Yes. 6 DAVID HEINLEIN: David Heinlein. 7 Mr. Fenoglio did fail to mention, though, what we 8 did in assessment of cost of the compliance and his 9 charity was quarter of a million? 10 MR. FENOGLIO: Thirty thousand. 11 DAVID HEINLEIN: Thirty thousand, and 12 I figured that our charities would average about a 13 $5,000 cost to provide those records that were 14 requested. I think you ought to know that too 15 before you vote. 16 MS. GREENFIELD: I don't want it to 17 go forward for -- 18 MS. TAYLOR: So the question that I 19 would like to know, if we take no action like we 20 just finished doing, so that we don't go back to 21 this, is it going to go forward for publication to 22 say that the BAC took no action on it? 23 MR. GABRILLO: I'll let Phil address 24 that. 25 MR. SANDERSON: It would probably go 0239 1 -- the report to the Commission would be that the 2 BAC chose to take no action on this rule. 3 MS. TAYLOR: Okay. In that case, I 4 think, since that's really I don't think what any 5 of us want, I mean, I don't know because I don't 6 know what your vote is going to be, but if you 7 don't mind, I'd like to go back to that rule so 8 that maybe we can show something other than no 9 action. 10 MR. WHITTINGTON: Well, wasn't there 11 something else, too, another rule that we did the 12 same thing on? 13 CHAIR BRACKETT: We had three things 14 to consider separately and what we're considering 15 right now is the new rule relating to books and 16 records inspections. 17 MS. TAYLOR: Could we go ahead and go 18 back to 402.590, the one that did not have a second 19 just now? Because in that case, I would like to 20 second the motion so that we could vote on our 21 feelings about that rule going forward. 22 CHAIR BRACKETT: Okay. Before we do 23 that, I would like to have a -- some show of 24 consensus that this is what you'd like to do, is to 25 reconsider the lack of action on rule 402.590, 0240 1 just to show you a consensus. Everyone agree? 2 Okay, everyone agrees to that. All right. So 3 we'll reconsider action on general audit rule 4 402.590, which sets out the general steps involved 5 in audit. 6 And we have been ask to -- well, 7 Marilyn, you're really just asking -- your group is 8 really just asking us to approve this, correct? 9 MS. MATTHEWS: Right. 10 CHAIR BRACKETT: Okay. We've been 11 asked to approve this. Do I hear second to that? 12 MS. TAYLOR: I'll second it. 13 CHAIR BRACKETT: Okay. All those in 14 favor, please say aye. And all those opposed, nay? 15 MS. TAYLOR: Nay. 16 CHAIR BRACKETT: Then we do oppose 17 the -- this rule. The general audit rule 590. 18 And that brings us to 402.592, 19 books and records inspections. Go ahead, Roy, I'm 20 sorry. 21 MR. GABRILLO: I don't have anything 22 unless somebody has comments or questions about it. 23 MS. TAYLOR: I have one question 24 about this one. Page 1 of 2, line 17 B, where it 25 says the books and records to review or examined 0241 1 but are not limited to those records that relate to 2 the operation of bingo and the licensee's 3 charitable distribution. 4 It seems that any records that have 5 nothing to do with the charitable distributions and 6 bingo shouldn't have to be examined. 7 If I have an account that has nothing 8 to do with bingo, I don't see why I should have to 9 make those records available because that's -- if 10 bingo funds never went there and I can prove 100 11 percent my bingo money went into this account here, 12 but according to this rule, everything has to be 13 available and I take exception to that. 14 MR. GABRILLO: Well, again, this is 15 just -- that particular phrase is just to encompass 16 anything that's outside the -- I mean, you're 17 right. It doesn't have anything to do with bingo, 18 if the account is not receiving any funds from 19 bingo, there is no reason for us to call for it, 20 but at the same time, we might end up, if we just 21 ask for certain records and then it turns out that 22 there was, you know, there were other accounts and 23 we didn't request them, they'll come back to us 24 and, well, you didn't tell us I had to provide it. 25 MS. TAYLOR: Well, if it just took 0242 1 out "not limited to," if it just will include 2 "records that relate to the operation of bingo and 3 the licensee's charitable distributions." You can 4 track all the way down to the last penny because I 5 would have to provide you any little item that 6 related to my bingo and charitable distribution. 7 MR. GABRILLO: Okay. We'll Consider 8 that. 9 CHAIR BRACKETT: With this 10 consideration -- were there other comments? With 11 this consideration of the phrase on item -- line 12 18, page 1 of 2, on books and records, but are not 13 limited to, that they're going to reconsider that, 14 are you ready to take a vote on this to approve it 15 and send 592 on for -- well, I believe I've said 16 enough. All those in favor of this, please say 17 aye. All those opposed, please say no. 18 MS. MORRIS: Madam Chair, you didn't 19 have a motion and the court reporter was unable to 20 take "yeses" or "nos" on either way. I don't know 21 that she was able to record it. 22 CHAIR BRACKETT: Okay. I thought she 23 did. Will you say the motion, Marilyn? 24 MS. MATTHEWS: We move that rule 25 402.592 books and records inspections rule be 0243 1 recommended to the Texas Lottery Commission and 2 published in the register for formal comment. 3 MS. TAYLOR: I'll second it. 4 MS. GREENFIELD: With your -- with 5 your additional comment, with Suzanne's comment. 6 CHAIR BRACKETT: Yes. Roy has agreed 7 to include to but not limited to. 8 MS. MATTHEWS: To delete. 9 MR. SANDERSON: To consider it. 10 CHAIR BRACKETT: To consider it. 11 Uh-huh. Is there any further question or questions 12 or comments on this? Are you ready for the 13 question? All those in favor of presenting 14 402.592 on for books and -- for the compliance to 15 be published in the Texas Register for formal 16 comment, please say aye. 17 ALL: Aye. 18 CHAIR BRACKETT: Those opposed? 19 Okay. Thank you. 20 All right. That brings us to 596, 21 the compliance review. 22 MS. MORRIS: It would be Item number 23 five on your agenda? 24 CHAIR BRACKETT: It's six on the 25 agenda. 0244 1 MS. MORRIS: No, it's five. 2 MR. WHITTINGTON: It's number five. 3 MS. MORRIS: General audits is number 4 five, the compliance reviews. 5 MR. WHITTINGTON: Yeah. 6 MR. SANDERSON: Yeah. 7 CHAIR BRACKETT: Okay. Roy, do you 8 have any comments on that, that you want to make, 9 or, Marilyn, you were introducing these? 10 MS. MATTHEWS: I don't have any 11 comments. 12 CHAIR BRACKETT: Anyone have any 13 questions of Marilyn or of Roy? 596? You were 14 wanting some comments, weren't you, Roy, on this, 15 weren't you wanting some comments regarding this? 16 MR. GABRILLO: No, not really. 17 CHAIR BRACKETT: Okay. So are you 18 ready to move on this, on books and records 19 inspections, 402.596, to be published in the Texas 20 Register -- 21 MS. MOORE: Excuse me, I'm going to 22 interrupt you. I don't believe it's a books and 23 records inspections, I think you're talking about 24 compliance reviews. 25 CHAIR BRACKETT: Okay. Well down 0245 1 here, I was reading this down here. 2 MS. MATTHEWS: The agenda is out of 3 order. 4 MR. SANDERSON: Yeah, 596. 5 CHAIR BRACKETT: I'm sorry. Thank 6 you. 596, compliance review -- I was reading ahead 7 too far -- where it sets out the general steps 8 involved in a compliance review. All those in 9 favor of this to be moved on? 10 MR. SANDERSON: You've got to make a 11 motion. 12 MS. MATTHEWS: I move that the BAC 13 recommend to the Texas Lottery Commission that rule 14 402.596 be approved and published in the Texas 15 Register. 16 MR. MOORE: I'll second that. 17 CHAIR BRACKETT: All those in favor? 18 ALL: Aye. 19 CHAIR BRACKETT: Anyone opposed? 20 Okay. Thank you, Marilyn. And thank you, Roy. 21 MR. GABRILLO: Thank you. 22 CHAIR BRACKETT: Okay. Marilyn, you 23 have another one to submit to us? 24 MS. MATTHEWS: I don't think so. 25 That's it. 0246 1 CHAIR BRACKETT: Okay. All right. 2 I'm finished. Do you want to do -- go over these 3 quarterly comparisons for us? 4 MR. SANDERSON: Madam Chair and 5 members, in your notebook is a quarterly statistic 6 data for the second quarter of 2003, and the 7 information that's provided gives gross receipts, 8 charitable distribution and expenses and attendance 9 comparison for the quarter of each year, like the 10 second quarter of 2003, compared to the second 11 quarter of 2002 and the second quarter of 2001. 12 And then you also have a breakdown between the 13 first and second quarter of 2003, and how that 14 compares to the first and second quarter of 2002, 15 and so forth. 16 The division would request that the 17 BAC appoint a subcommittee to begin working with 18 staff to analyze this information in the 19 preparation of the annual report and to formulate 20 some specific recommendations. 21 CHAIR BRACKETT: Okay. Who is 22 interested in working on this with BAC, to work on 23 the information for the annual report? 24 MS. TAYLOR: I will. 25 CHAIR BRACKETT: Okay. Suzanne 0247 1 Taylor will. Thank you, Suzanne. Is there 2 anything else you want to -- under that item? 3 MR. SANDERSON: Not on this item, no. 4 CHAIR BRACKETT: Okay. We've already 5 covered the discussion of bingo player survey, he 6 gave that before he left. 7 MR. SANDERSON: Nine. 8 MR. WHITTINGTON: Web site. 9 CHAIR BRACKETT: Pardon? 10 MR. WHITTINGTON: The web site is 11 Suzanne. 12 CHAIR BRACKETT: Suzanne Taylor has a 13 report. 14 MS. TAYLOR: Well, I'll tell you the 15 truth, I don't have a clue what it says. We met 16 with the web site committee, we met on the phone 17 several times but in all honesty, I thought this 18 was probably done at the last meeting so you could 19 read as easily as I can whatever it says in the 20 book. 21 The only thing I'll say about the web 22 site that I was surprised is when I tried to log on 23 recently, I didn't have my page expanded to the 24 full size that it can be. I think most of us when 25 we log on, whatever size comes up is the size it 0248 1 is. I couldn't find the bingo web site even though 2 I was logging on to TX Bingo dot org. I kept 3 coming up to the Lottery Commission web site. And 4 I couldn't find the place on there because I didn't 5 hit full page, you know, to make it get big. 6 I couldn't even find where it had the 7 bingo stuff on there, so I was really surprised 8 because I thought that that was going to take us 9 right to the bingo web site and instead it kept 10 taking me straight to the Lottery Commission web 11 site so I asked Virginia what I was doing wrong. 12 And so she logged on, too, and she's the one that 13 said, oh, you have to expand the page and then you 14 can see the bingo from the web site. 15 So it surprised me after the work 16 that we did, and I'm logging on trying to get to 17 the bingo web site and I can't even find it myself 18 because I didn't -- I was going to information and 19 from information logging on to bingo questions or 20 something. But I realized I've been working on 21 this web site with you and I couldn't find the damn 22 web site. 23 Now, I don't know how easy this web 24 site is to find because I really thought it would 25 go just straight to the bingo web site and not to 0249 1 the Lottery Commission web sit because it goes to 2 the same -- if you log onto Texas Lottery, it goes 3 to that site. And when I was logging onto bingo, 4 it was going to the web site. 5 And I asked Virginia just to make 6 sure I just wasn't being totally out of it to do 7 the same thing and she had the same results I did 8 so I don't know. And I haven't logged onto it in 9 the last week or two. 10 MS. SHANKLE: Okay. Phil is doing 11 itright now and you put in Tx dot Bingo dot org. 12 MR. SANDERSON: WWW dot Txbingo dot 13 org, and it takes you to bingo the web site. 14 MS. TAYLOR: We were going straight 15 to the lottery web sit and having to get to the 16 bingo from there. 17 MS. SHANKLE: But were you doing TX 18 dot bingo? 19 MS. TAYLOR: Uh-huh, uh-huh, and so I 20 asked Virginia to do it. My mind hasn't been 21 completely there in the last couple of days, as you 22 probably know, so I asked Virginia if she could 23 help me out because I couldn't get straight to the 24 bingo web site so I don't know what it was, but 25 like I said, it was several weeks ago that we 0250 1 talked and worked on this. 2 MS. SHANKLE: Well, I go into that 3 site nearly every day and I never had that problem 4 but I will discuss it or have someone on my 5 staff -- 6 MS. GREENFIELD: Sometimes I'm able 7 to get to the bingo page but sometimes I do get to 8 the lottery page so -- 9 MS. SHANKLE: It's because the bingo 10 page is so busy that it has to defer you -- 11 MS. TAYLOR: Is -- is the place to 12 find bingo on the lottery web site is up far in the 13 right-hand corner, if we could move that a little 14 ball somewhere on the left-hand side where it shows 15 up when you first open the web site, that would be 16 better because if it goes to that one, at least you 17 can see that without calling a friend to help you 18 out to find the ball. 19 MS. SHANKLE: I will ask that that be 20 done. And all of this is being revised and stuff 21 and the people that we have the contract with, 22 golly, they're great and it's really going to be -- 23 it's going to be wonderful once they're complete. 24 MS. TAYLOR: But before you start, 25 let me tell you, you were a tremendous -- I mean, 0251 1 she was so nice because we knew as much about web 2 sites as the man in the moon when we started and we 3 had help from our public member, which she was 4 really helpful. And I'm sorry that I'm not more 5 prepared, I just haven't been doing too much in the 6 last couple of months so I'll just let you take it. 7 MS. SHANKLE: Okay. Well, we have 8 made some steps towards trying to accomplish the 9 task that were prioritized for us. 10 We've met -- we have a new vendor by 11 the name of Citation Solutions and they would 12 -- Phil talked with them yesterday, at the next BAC 13 meeting, they would like to come and talk with you, 14 maybe we should go through the subcommittee first, 15 and have them talk with you, get some more ideas of 16 what you would like, et cetera. 17 But on July the 22nd, we met with 18 Citation Solutions and we proposed twelve ideas, 19 which the ideas of the web site subcommittee were 20 in that twelve. 21 Of the twelve that were proposed, six 22 were adopted by the lottery and bingo staff to be 23 completed over the course of the next two years. 24 And there were the bingo financial -- bingo 25 initiatives that were adopted and I was very 0252 1 pleased with that. 2 So what they're going to start on 3 first is the bingo financial reporting services and 4 that is going to be all of the Texas bingo 5 conductors by county, city, all of the open records 6 request that we get on a continual basis, they're 7 going to take that and put it on the web site so 8 that it will be more accommodating. 9 And then our next step will be the 10 bingo licensing renewal and support system. And 11 then they're going to look at improving the 12 customer interactivity and then on-line training, 13 but maybe on the number three, if that's where they 14 could look at taking -- we may have a whole new 15 look so -- but we will discuss with them bringing 16 that button down and putting it somewhere that's 17 eye view, but they would like to visit with us on 18 it and I -- 19 MR. MANIO: May I interrupt you for 20 one second, Terry? Item number three, interruption 21 between window and its licensee's. What -- who are 22 you referring to when you say bingo? 23 MS. SHANKLE: The conductors and 24 thelessors. 25 MR. MANIO: Okay. 0253 1 MS. SHANKLE: And then at some time 2 it may not be -- because they have to, again, 3 prioritize what we wanted but the others are still 4 out there so we may if they get finished, which 5 then we could look at the player pages and stuff 6 which we wanted the tabs where the players could go 7 in to learn how to play bingo, what is the latest 8 pull tab that's been approved, et cetera, but these 9 were the top that we would go with first. 10 CHAIR BRACKETT: Any questions of 11 Terry or Suzanne? Okay. Then we're -- is the 12 bingo bulletin committee ready to make a report, 13 Mario? 14 MR. MANIO: No, there has been no 15 graphic -- 16 MS. SHANKLE: Well, that's really not 17 true. There has been, and he -- bless his heart, 18 he keeps us on -- there has been things done. We 19 have taken out the personal notices of the bingo 20 bulletin. 21 The July and August, September review 22 will have the top ten charities based on their 23 gross receipts, including the information. So we 24 are looking at your ideas and we are incorporating 25 them and I just didn't have time to get it into the 0254 1 notebook so we are taking those and you'll be 2 seeing it in the next issue of the recommendation. 3 MR. MANIO: May I just -- may I say 4 something? What I'm going to say to you now should 5 not deter you from doing or complying with the 6 challenge that was issued in the last meeting. 7 The challenge was for the members of 8 the committee to nominate charities to be featured 9 in the bingo bulletin. 10 Shortly after the meeting in June, I 11 sent a nominee and subsequently it was declined for 12 reason that was not revealed to me because of 13 confidentiality. 14 Anyway, that should not prevent you 15 from sending your nominations to Terry. 16 MS. SHANKLE: We would really like to 17 have them because those stories are fun to read. 18 CHAIR BRACKETT: Terry, do you have 19 anything on alternative -- no, I'm sorry. Suzanne, 20 you were in charge of that? 21 MS. TAYLOR: You don't remember what 22 I just told you? 23 CHAIR BRACKETT: No, so you were 24 wanting to know -- you want to skip this unless 25 someone can -- 0255 1 MS. TAYLOR: Right. 2 CHAIR BRACKETT: Do you have a 3 report, Phil? 4 MR. SANDERSON: Staff does not at 5 this time. 6 CHAIR BRACKETT: We've already 7 covered number twelve. All right. Any public 8 comment that we haven't heard yet that anyone in 9 the public would like to make? Okay. Thank you. 10 We need to set a date for our next 11 meeting. 12 MS. GREENFIELD: Can we make it on a 13 Tuesday? 14 MS. TAYLOR: If we're taking a vote, 15 I'd rather do it on a Friday. 16 CHAIR BRACKETT: Why don't we decide 17 on the month first and then -- 18 MR. MOORE: I think Thursday is best. 19 CHAIR BRACKETT: Okay. Thursday of 20 what month? October, November? You all are not 21 helping out. October, October 23rd? 22 MR. SANDERSON: There's about a 23 two-week period in October that we have blocked out 24 for other activities, which is from the 12th 25 through the 31st, actually that's three weeks. 0256 1 CHAIR BRACKETT: That's three weeks. 2 MR. MOORE: How about the first week 3 in November? 4 CHAIR BRACKETT: First week in 5 November; November 6th? Thursday, November 6th? 6 MR. MOORE: That could very well be 7 our last meeting of the year, huh? 8 CHAIR BRACKETT: Oh, I'm sure it will 9 be, yeah. 10 MR. MOORE: Yeah. So Suzanne is 11 going to have to have that report ready. 12 CHAIR BRACKETT: Any other comments? 13 Phil, do you have anything? 14 MR. SANDERSON: No. When do you want 15 to -- do you want to try to have some agenda items 16 starting somewhere around the 12th of October, set 17 that as a time and date to get agenda items to you? 18 CHAIR BRACKETT: Okay. Monday, the 19 13th of October? 20 MR. SANDERSON: Yeah, October 13th, 21 since the -- yeah, the 13th. 22 CHAIR BRACKETT: Mr. Cox, thank you 23 for staying the whole time. We appreciate it. 24 COMMISSIONER COX: Thank you for all 25 y'all do. 0257 1 CHAIR BRACKETT: Were you well 2 entertained? Thank you. And thank all of you and 3 the staff, everyone has put tons and tons of time 4 and elbow grease and everything else, lots of 5 thoughts into everything that's going on and we 6 certainly do appreciate it. Appreciate those who 7 traveled and those who traveled to Austin 8 in mad traffic so -- and with that, the meeting is 9 adjourned. 10 (Adjourned at 4:30 p.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0258 1 REPORTER'S CERTIFICATE 2 THE STATE OF TEXAS ) 3 ) COUNTY OF TRAVIS ) 4 5 6 I, CONNIE JO RAMIREZ, Certified 7 Shorthand Reporter for the State of Texas, do 8 hereby certify that the above-captioned matter came 9 on for hearing before the BINGO ADVISORY COMMISSION 10 meeting as hereinafter set out, that I did, in 11 shorthand, report said proceedings, and that the 12 above and foregoing typewritten pages contain a 13 full, true, and correct computer-aided 14 transcription of my shorthand notes taken on said 15 occasion. 16 Witness my hand on this the 4TH of 17 SEPTEMBER, 2003. 18 19 20 ______________________________________ CONNIE JO RAMIREZ, Texas CSR #2484 21 Expiration Date: 12/31/03 WRIGHT WATSON STEN-TEL 22 1609 Shoal Creek Boulevard, Suite 202 Austin, Texas 78701 23 (512) 474-4363 24 25 JOB NO. 030821CJR