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 4                                                                
 5                               
 6               BINGO ADVISORY COMMITTEE MEETING
 7                               
 8                       NOVEMBER 17, 2004
 9                               
10         * * * * * * * * * * * * * * * * * * * * * * *
11                                                                 
12   
13   
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16   
17   
18   
19       BE IT REMEMBERED that the BINGO ADVISORY COMMITTEE 
20   meeting was held on the 17th day of NOVEMBER, 2004, from 
21   10:06 a.m. to 3:48 p.m., before Gina S. Verduzco, CSR in 
22   and for the State of Texas, reported by machine 
23   shorthand, at the offices of the Texas Lottery 
24   Commission, 116 East Sixth Street, Austin, Texas, 
25   whereupon the following proceedings were had:
0002
 1                    A P P E A R A N C E S:
 2   
     Chairperson:
 3   
         Ms. Suzanne Taylor
 4       (Corpus Christi, Commercial Lessor)
 5       
     Committee Members:
 6            
         Mr. Daniel Moore
 7       (Houston, Manufacturer/Distributor)
 8       Mr. Larry Whittington
         (Dallas, Charity)
 9   
         Ms. Kimberly Rogers
10       (San Antonio, Charity/Lessor)
11       Mr. Mario Manio
         (Garland, Commercial Lessor)
12   
         Mr. Pete Pavlovsky
13       (Rosenberg, Charity)
          (NOT PRESENT)
14   
         Mr. John "Jack" Dougherty
15       (Austin, General Public)
16   
     Charitable Bingo Operations Director:
17   
         Mr. Billy Atkins
18   
19   
20   
21                       *  *  *  *  *  *
22   
23   
24   
25   
0003
 1                             INDEX
                                                         PAGE
 2   Appearances........................................   2
 3   
     AGENDA ITEMS
 4   
     Item Number 1 .....................................   4
 5   Item Number 2 .....................................   4
     Item Number 3 .....................................  38
 6   Item Number 4 .....................................  40 
     Item Number 5 .....................................  42
 7   Item Number 6 .....................................  50
     Item Number 7 .....................................  89
 8   Item Number 8 ..................................... 126
     Item Number 9 ..................................... 127
 9   Item Number 10 .................................... 127
     Item Number 11 .................................... 182
10   Item Number 12 (morning)...........................   5
     Item Number 12 (afternoon).........................  89
11   Item Number 13 .................................... 185
     Item Number 14 .................................... 185
12   Item Number 15 .................................... 198
13   Amendment Sheet ................................... 199
     Reporter's Certificate ............................ 200
14   
15   
16   
17   
18   
19   
20   
21   
22   
23   
24   
25   
0004
 1                       NOVEMBER 17, 2004
 2                 CHAIR TAYLOR:  I will call the meeting to 
 3   order.  We do have a quorum.  The time is 10:06. 
 4                 The first thing on the agenda is the Bingo 
 5   Advisory Committee will call the meeting to order.  
 6   We've done that. 
 7                 The second agenda item, consideration of 
 8   and possible discussion and action to select the new 
 9   vice-chair of the Bingo Advisory Committee. 
10                 Well, Billy has shown me that in the rules 
11   where it actually states that the presiding officer will 
12   designate a member of the BAC to conduct the meetings 
13   and general business in the absence of the presiding 
14   officer, so I'm asking for a volunteer.  Would one of 
15   you like to be the vice-chair in case I can't make a 
16   meeting?
17                 MR. DOUGHERTY:  I nominate Danny Moore. 
18                 MR. MOORE:  She's asking for volunteers.
19                 MR. DOUGHERTY:  Oh, is she?  Okay. 
20                 CHAIR TAYLOR:  Okay.  You don't have to do 
21   it now is what Billy is reminding me.  That if something 
22   happens, I'm not making a meeting, that I can call and 
23   ask you to run the meeting.  However, in case of -- that 
24   I'm not able to call, there would be nobody left since 
25   that's supposed to be something that I'm doing, which is 
0005
 1   why it would be nice if one person would volunteer to 
 2   run the meeting just in case something happens I 
 3   couldn't be at the meeting.  Right, Jack? 
 4                 MR. WHITTINGTON:  I think if something 
 5   happens, Suzanne, you really should call Danny because 
 6   Danny would be happy to do it.  He just told me that, 
 7   so -- 
 8                 CHAIR TAYLOR:  Then Danny is volunteering 
 9   to be vice-chair?  Thank you, Danny. 
10                 MR. WHITTINGTON:  Doesn't he look like a 
11   vice-chair to you?  You look like a president. 
12                 CHAIR TAYLOR:  Okay.  Something I'm just 
13   noticing, the approval of the minutes didn't make it on 
14   here, so we will put that on the next agenda to approve 
15   the minutes of the last meeting. 
16                 Okay.  Item No. 3, "Consideration of" -- 
17   oh, oh, oh.  I am sorry. 
18                 First of all, let me -- let me welcome Tom 
19   Clowe.  He's here with us this morning, and one of the 
20   first items that we are -- we're going to go ahead and 
21   skip on down to Item No. 12.  It's "Discussion of a 
22   joint meeting of the Texas Lottery Commission and the 
23   Bingo Advisory Committee."  Welcome.
24                 COMMISSIONER CLOWE:  Good morning.  Thank 
25   you.  Good morning, Madam Chairman and members.  I hope 
0006
 1   everybody made it in dry this morning and in good shape. 
 2                 I would like to visit with you this 
 3   morning about a number of things.  First of all, 
 4   under the agenda item of the possibility of a joint 
 5   BAC/Lottery Commission meeting, the discussion that the 
 6   Commission had in this room yesterday at their November 
 7   meeting and report to you on what I think were the high 
 8   points of that. 
 9                 Then, additionally, I would like to make a 
10   comment about Sunset, which the Commission is going 
11   through again in this next regular session.  Then I 
12   would like to finish my remarks with you this morning 
13   and give you some comments about the BAC and where I see 
14   you at this point in time. 
15                 As you all know, I've been on the board -- 
16   I'm in my sixth year now, and I've been the designated 
17   bingo commissioner since Commissioner Sadberry left the 
18   board, and I have tried to learn as much about bingo and 
19   be involved in it as much as possible because I've 
20   really been concerned about this industry. 
21                 I have been in my commercial life more on 
22   the regulated side of this equation, being a trucker 
23   regulated by the Railroad Commission, than I have been a 
24   regulator, and for that reason I'm very empathetic in 
25   many cases when people come to see the division or they 
0007
 1   come to see me about their problems.  And you may ask 
 2   when I'm finished, you know, "Why did he come and talk 
 3   to us this morning?" and I would like to tell you in 
 4   advance it's because I am concerned about this industry 
 5   and because I care about this industry and because I 
 6   think that the industry is reaching a point where it 
 7   needs to take cohesive action, and it needs to deal with 
 8   some issues that are out there on the table and are 
 9   going to be facing it in order to continue to be a 
10   viable part of the charitable contributions that are 
11   made across this state. 
12                 And in our discussion yesterday, I tried 
13   to make the point for the commissioners and for those 
14   attending in our discussion about bingo that in my 
15   knowledge and in my belief the reason we have bingo in 
16   the state of Texas and the reason it was enacted over 20 
17   years ago was to benefit charities.  I really don't 
18   think that the revenue that goes to the State is a 
19   significant item in the minds of the legislature and the 
20   leadership when they think about bingo.  And I think we 
21   are losing some ground in that justification currently, 
22   and I asked Billy to provide the Commission with some 
23   longer-term numbers, three to five years, about how the 
24   revenue and the net income -- and net income is what 
25   really is important -- relates to charitable 
0008
 1   contributions.  As regulators and as legislators and as 
 2   public officials looking at the bingo industry, I think 
 3   that's the focus.  You know, what's happening with the 
 4   charities? 
 5                 Let me go back and report to you on some 
 6   of the comments that were made yesterday in the 
 7   commission meeting, and I invite you when that 
 8   transcript is published and put on the web site to go 
 9   back and read that if you have the time.  The discussion 
10   lasted almost an hour and a half, and a great part of it 
11   was to benefit Commissioner Olvera, who although he's 
12   been here a year has not been here as long as 
13   Commissioner Cox and myself, and we wanted to cover a 
14   number of points that would allow him to understand the 
15   history of where we are with bingo today. 
16                 In that transcript I think you'll read 
17   some comments about bingo being an industry that is 
18   losing market share.  It is an industry that because of 
19   the continuing development of competitive gaming -- the 
20   lottery certainly is a competitive gaming activity to 
21   bingo, but probably more than that, 8-liners are a 
22   faction that have to be considered. 
23                 The Lottery Commission has looked at how 
24   many 8-liners are in this state, and it is to me 
25   substantial, and it is a substantive competitive force 
0009
 1   not only to the lottery but to bingo operation as well.  
 2   I think Internet gaming is a competitive force, and 
 3   clearly as Internet gaming continues and develops, it 
 4   will be attractive to people who are computer literate 
 5   and take away the opportunity for historic or 
 6   traditional forms of gaming such as bingo to reach to 
 7   younger people.  And that leads to the problem that you 
 8   and I have talked about numerous times, that is, the age 
 9   of the player, and so in so many cases there are people 
10   my age -- and that's the older group, not the 
11   middle-aged or the younger group -- and also the people 
12   who are smokers.  And I believe in North Texas and the 
13   Dallas area, they just approached that issue and 
14   re-voted on it or dealt with it, and I think they turned 
15   it down, if I remember -- my recollection of reading the 
16   newspaper accounts.
17                 So where -- in lottery -- and the State 
18   owns the lottery in this Texas -- we have been able to 
19   be very creative.  We have five on-line games, and we 
20   have 92 instant ticket offerings, and we have constantly 
21   changed those instant tickets offerings, and they are 
22   currently 68 percent of the revenue that comes into the 
23   lottery, the highest percentage it's ever been, and the 
24   on-line games have been constantly changed.  You know, 
25   we changed -- the Lotto Texas, we changed it twice.  
0010
 1   We've gone to Mega Millions.  We got the Megaplier. 
 2                 And my view of what we're doing with the 
 3   lottery is what a produce merchant does in the produce 
 4   business.  He just doesn't stock all apples or all 
 5   bananas because there's some people that don't like 
 6   apples and don't like bananas.  So you have apples and 
 7   pears and peaches and avocados and grapes, and you have 
 8   all of those, and you see what sells.  And when you see 
 9   what sells, you develop that, and you move away from 
10   those things that don't sell.  That's my idea of what we 
11   do at the lottery.  We don't fall in love with any one 
12   game and say, "Oh, everything depends on that," or any 
13   one ticket. 
14                 We offer an array of choices to the 
15   players of Texas, and they make their choices, and we 
16   are studying that market, and I think that's exactly 
17   what every retailer in the United States and maybe the 
18   world does who is successful.  And I think it is 
19   certainly what gaming enterprises that we have studied 
20   in the United States and the world do. 
21                 Now, I give you that as an example because 
22   I don't think you are able to do that in the bingo 
23   industry.  I think except for the pull-tab advancement, 
24   it has been really a basic offering to the gaming 
25   player, and it hasn't changed all that much. 
0011
 1                 And that's where it goes back to the Bingo 
 2   Enabling Act.  In my opinion it is obsolete.  It's over 
 3   20 years old.  I don't think it deals with the needs of 
 4   your industry today.  It is what the Commission and the 
 5   Charitable Bingo Division have to regulate and do their 
 6   business with, by, and for.  We cannot step outside of 
 7   that stage. 
 8                 And I'm hopeful that in spite of the 
 9   advancements that were created in this last 
10   session where we got some very beneficial things for 
11   bingo -- I think back on, for example, the unit 
12   accounting and many other issues that I think were 
13   internally favorable for the bingo industry, 
14   cost-reducing items -- we really didn't get to the 
15   larger issue of how can this industry be more productive 
16   in creating contributions to charities.  That's the key 
17   thing.  It isn't so somebody makes more money.  In my 
18   mind it's not even so the State can make more money.  
19   It's primarily so the charities can receive more 
20   contributions.
21                 We are coming up again for Sunset, and we 
22   have already appeared before the Sunset Commission, and 
23   where last time in my mind in the regular session it was 
24   sort of all about bingo, the lottery really didn't have 
25   much camera time when it came to Sunset.  And there was 
0012
 1   a question of, you know, "Is bingo really being run 
 2   right internally?  Are the charities getting all the 
 3   monies they should?"  You remember that the Sunset 
 4   recommendation included a fixed portion of -- I think it 
 5   was the net income, if I'm remembering that correctly.  
 6   If I'm not, hopefully somebody will correct me.  But it 
 7   was a percentage of contribution that the Commission 
 8   actually heard testimony from the industry and voted not 
 9   to agree with that recommendation and came back with a 
10   counterproposal because we felt, based on our statistics 
11   that were available to us, it would put over half of the 
12   operators out of business in this state. 
13                 But the question continues -- and there's 
14   a concern -- you know, Are the expenses legitimate?  Are 
15   the charities getting every dollar that they should get?  
16   I am asked that question constantly.  And I think when 
17   you talk about a revision of the Bingo Enabling Act, the 
18   industry needs to be aware of that concern and those 
19   questions and deal with it, and I think there need to 
20   be -- if an effort is made to improve the contributions 
21   to charities, an effort needs to be made to show that 
22   they are getting every dollar that they should be 
23   getting.  And, you know, when you get these surplus 
24   operating funds that have tremendous balances, it raises 
25   a legitimate question:  Why are they so big?  Do they 
0013
 1   really need to be that big? 
 2                 I know there's an issue of cyclical 
 3   playing, some quarters when there's more revenue and 
 4   some quarters when there's less and the balancing of 
 5   that money so the contributions can continue.  But not 
 6   thinking about it quarter to quarter or even year to 
 7   year, over a three to five-year period, what's the 
 8   history? 
 9                 Sunset probably will focus more on the 
10   lottery in this regular session.  It will probably focus 
11   more on VLT's and what that revenue stream could do 
12   relative to property taxes and school needs.  I'm not 
13   trying to forecast for you what I think the legislature 
14   is going to do, but coming out of the special sessions, 
15   you can see that there is an interest in VLT's and that 
16   issue. 
17                 But I think it's important for you-all to 
18   realize, your industry to realize that if those issues 
19   are dealt with and they go forward, you could be run off 
20   and left because if that type of gaming or anything 
21   similar to that is authorized in this state, it is a new 
22   competitive factor to those which I have already 
23   mentioned that you are competing with every day.  So if, 
24   for example, VLT's were authorized in this state, then 
25   the question would be:  Do you have a product that can 
0014
 1   compete for the gaming dollar that is authorized in 
 2   bingo operations?  I think my answer today would be, no, 
 3   you don't. 
 4                 And you have an effort that was made to 
 5   step up, and the issue is complicated.  It is complex 
 6   because there is the issue of Class II and Class III 
 7   gaming in this state, and what I think you need to do 
 8   and what I'm here this morning to urge you to do, your 
 9   industry, is to be aware and not be caught in a regular 
10   session that's coming up where I think these issues are 
11   going to be dealt with and not be prepared to have your 
12   industry represented.  And you are the best 
13   representatives as industry spokespeople to people who 
14   will make -- be making these decisions.
15                 Now, the Lottery Commission acts as a 
16   resource.  Let me make that very clear to you.  We do 
17   not offer legislation.  We are forbidden from doing that 
18   or from lobbying for legislation.  The legislators who 
19   are elected, the leadership who is elected make 
20   legislative decisions, and then they call on the state 
21   agencies as resources to help them when they are writing 
22   proposed legislature.  
23                 And yesterday on the record, Commissioner 
24   Cox asked, "Well, what kind of a job is the Bingo 
25   Division doing -- Charitable Bingo Division doing of 
0015
 1   answering those kinds of questions about the state of 
 2   the bingo industry?"  And although I let Billy answer 
 3   it, I jumped in ahead of him, and I wanted to give my 
 4   answer, and that is I think that the bingo division and 
 5   Billy have done a very good job of identifying the 
 6   things that would be beneficial to the bingo industry:  
 7   raising the limit, other mechanical devices, things that 
 8   would loosen up the opportunities for the bingo industry 
 9   to be more competitive as a gaming opportunity, and I 
10   think the bingo division is ready to offer those kinds 
11   of resource answers if questions are asked by 
12   legislators of, "What does the industry need?"  And 
13   Billy and the division wouldn't be the only source.  You 
14   as the industry would be the best source.
15                 Now, all of this comes back to the agenda 
16   item of a joint BAC meeting with the Lottery Commission.  
17   And the Commission met a couple of months ago to develop 
18   their business plan, and we -- of all the segments that 
19   we got into, we talked about bingo, and I expressed a 
20   frustration on my part because I didn't feel and I don't 
21   feel that we are getting where we need to go with this 
22   industry.  I said that to you at the beginning of my 
23   remarks.  And the question was asked, "Well, what about 
24   a joint BAC/Lottery Commission meeting to talk about 
25   these things where we could just in an open meeting with 
0016
 1   a published agenda with you-all as representatives of 
 2   your industry and advisors to the Commission have a 
 3   dialogue with the Commission?" 
 4                 We can do that to some extent here this 
 5   morning.  You can ask me questions, and I can ask you 
 6   questions, and I can give you my opinion and that sort 
 7   of thing.  But it won't be as meaningful as if you had 
 8   all three commissioners here.  And to that end 
 9   Commissioner Cox is coming this afternoon to speak with 
10   you.  We can't be here together, as you know.  I don't 
11   know what he'll say, and his take will probably be very 
12   different from mine, but this is the only venue that I 
13   have to come and talk with you and give you a report 
14   unless we have a joint meeting.
15                 I would like to provoke some thought on 
16   your part about the benefits of a joint meeting.  Now, I 
17   don't think it's going to be beneficial if we just go 
18   back and talk about the same things over and over again.  
19   You know, we've got to plow some new ground, and we've 
20   got to talk about things that the industry can do, and 
21   you could get guidance, I think, from the commissioners.  
22   But please remember the Lottery Commission runs the 
23   lottery.  The Lottery Commission regulates bingo.  You 
24   and your industry colleagues are a private enterprise, 
25   and you run your bingo operations.  You have a 
0017
 1   charitable beneficial result, but the Lottery Commission 
 2   only regulates you according to the Bingo Enabling Act.
 3                 The Sunset Committee made another 
 4   recommendation.  They recommended that the Lottery 
 5   Commission do away with the BAC, and the Lottery 
 6   Commission didn't agree with that, and they authorized a 
 7   one-year extension -- I guess you could call it that -- 
 8   of the existence of the BAC.  That year comes up and 
 9   ends August 31st of next year.  I want to call that date 
10   to your attention because the Commission has to put it 
11   on the agenda, and they have to make a decision 
12   individually, and they have to vote whether to extend 
13   the life of the BAC. 
14                 I don't like surprises.  I don't like 
15   people doing things that I'm not aware of, and I'm here 
16   to tell you this morning that's going to happen, and I 
17   want to make you aware of it.  I don't want you to think 
18   of it personally and individually.  No one appreciates 
19   the sacrifice and the commitment that you have made to 
20   this industry, I think, more than I do.  I know you're 
21   paying your own transportation costs.  I know you're 
22   paying your own lodging costs.  I'm doing that in my job 
23   as well.  And nobody can compensate you for the time 
24   that it takes from your regular business commitments to 
25   read the information, do the committee work, and then 
0018
 1   come to these meetings and participate. 
 2                 But the Commission has got to look at it 
 3   in an objective and well-balanced way to see what 
 4   beneficial result comes from the BAC.  And to a certain 
 5   extent we've got that Sunset recommendation out there 
 6   that we're looking at, and we've got to after this year 
 7   extension make a decision on that, and I'm concerned 
 8   about that to the extent that I want more interaction 
 9   between the BAC and the Lottery Commission.  I want the 
10   other commissioners to feel some of the thoughts that 
11   I'm feeling and get their own feelings and get their own 
12   interaction with you about where the BAC is and where 
13   the lottery industry is going -- the bingo industry is 
14   going. 
15                 That's why I'm here this morning, and I 
16   just would finish by saying, again, you may say, "Well, 
17   why did" -- you know, "Why did he come, and why did he 
18   say this to us?"  I'm here because I'm concerned about 
19   the industry.  I'm concerned about people in this 
20   industry wanting help, wanting things that would be 
21   beneficial, and not understanding where that change can 
22   come from.  And if the commissioners can help in that 
23   understanding and that development of a plan to improve 
24   the bingo industry, which would benefit the charities of 
25   Texas -- that's the justification -- then I want as one 
0019
 1   commissioner to offer my time and efforts in that role. 
 2                 A state-of-the-industry meeting was 
 3   something that we had at the Railroad Commission.  When 
 4   I was executive director there, once a year the oil and 
 5   gas industry came in, and they had an open agenda where 
 6   members of the oil and gas industry could speak to the 
 7   commissioners, and the commissioners could speak to the 
 8   members, and they could have interface.  We did that 
 9   once, twice, maybe three years with the transportation 
10   industry before it was deregulated and the Commission no 
11   longer had authority over it.
12                 Think about something like that.  It might 
13   be beneficial for the Commission to host a 
14   state-of-the-industry meeting where representatives from 
15   the bingo industry could come in and talk about what 
16   they have on their minds relative to their situation, 
17   keeping in mind that the Commission is bound by the 
18   Bingo Enabling Act.  There are conversations that are 
19   appropriate with the Commission, and then there are 
20   other conversations that are appropriate with the 
21   elected representatives and senators and the leadership 
22   in the legislature. 
23                 I think that's just about everything I had 
24   on my mind, and I appreciate your attention, and it 
25   makes me feel good to be able to come before you this 
0020
 1   morning and tell you my thoughts and report to you on 
 2   this conversation we had yesterday in the commission 
 3   meeting.  And I hope I can provoke some thought and some 
 4   positive, beneficial action on your part that will be 
 5   helpful to the bingo industry.  That's where I'm headed. 
 6                 And, Madam Chairman, I would be happy to 
 7   answer any questions that I am asked. 
 8                 MR. WHITTINGTON:  I've got a couple.
 9                 CHAIR TAYLOR:  Go ahead, Larry. 
10                 MR. WHITTINGTON:  I appreciate your 
11   comments.  I mean, I always do.  From -- from the onset 
12   of when I first sat in this chair about two years ago, I 
13   brought up the main thing which you was talking about 
14   dealing with the Lottery Commission and the lottery 
15   tickets and stuff.  All of that is successful, that 68 
16   percent you said, because of that advertising put out 
17   there on those tickets.  The bingo could be just one of 
18   them tickets put out there, five percent of your 
19   advertising, whatever y'all do.  It would really help 
20   the bingo industry so much.  You would be shocked how 
21   much it will go up just having a public service 
22   announcement at the end of -- with the lottery tickets, 
23   just like I mentioned to you before. 
24                 How can we get to House and Senate?  How 
25   can we educate those people about bingo so they'll know 
0021
 1   about bingo?  Maybe we could get together on that and 
 2   come up with some type of brochure or something that 
 3   will educate these people about what bingo really means 
 4   to Texas.  I think it would really help a lot. 
 5                 COMMISSIONER CLOWE:  Larry, I think you're 
 6   right.  Ridgely, are we within the agenda on this?
 7                 MR. BENNETT:  I think if you're talking 
 8   about subjects that you would talk about at a joint 
 9   meeting, you-all are within the agenda item.  If you're 
10   looking for answers to questions now --
11                 MR. WHITTINGTON:  No, no.  I'm just --
12                 MR. BENNETT:  -- then you're not.
13                 COMMISSIONER CLOWE:  Okay.  Well, let me 
14   try to stay within the question of, you know, what would 
15   we talk about at a joint meeting.
16                 The Lottery Commission has a defined 
17   budget for advertising of the lottery as authorized by 
18   the statute, and we are watched very, very carefully on 
19   that.  There are those who like advertising of the 
20   lottery, and then there are those who don't.  And we 
21   actually have a formula that we follow where when sales 
22   go up, we have to reduce our advertising budget.  That's 
23   a little complicated to understand, but that's how 
24   closely our statute manages that.
25                 The Lottery Commission can put a bingo 
0022
 1   answer on when you call in and when you hold, we could 
 2   do things like that through the Charitable Bingo 
 3   Division, but I don't think that's what you're thinking 
 4   about.  I think you're talking about real money that 
 5   would have a tangible net result in increasing bingo 
 6   players.  And it's a great question, and it's a question 
 7   that I think the Commission and our staff could help you 
 8   answer if we were in a joint meeting, and I think that 
 9   we could help you along with your own lobbyists that you 
10   have representing this industry in getting educated on 
11   how to make those approaches. 
12                 MR. WHITTINGTON:  Thanks.
13                 COMMISSIONER CLOWE:  But I think you're 
14   right, Larry.  I don't see -- I see some, but I really 
15   don't see much advertisement for bingo on a broad basis.  
16   I see some local -- the veterans organization, the Red 
17   Men association, I see those folks advertising, and I 
18   see signage and that sort of thing, but I don't think 
19   it's the kind of advertising you're thinking of.
20                 MR. WHITTINGTON:  No, it's not.  I mean, 
21   it's just -- bingo is down, like you said, because of 
22   the 8-liners, the casinos.  A lot of stuff is happening 
23   as far as the VLT's might come in, and I don't think 
24   anybody is more deserving than the bingo halls to get 
25   VLT's and pay the same tax that these VLT's places are 
0023
 1   supposed to be paying to Texas.  I think they ought to 
 2   pay that same tax, and they would do very well by having 
 3   VLT's, too, as well as horse race tracks, whatever.  I 
 4   mean, I think we are more deserving than they are, and 
 5   we pay the same tax. 
 6                 COMMISSIONER CLOWE:  And if you don't 
 7   speak up for yourself --
 8                 MR. WHITTINGTON:  Right.
 9                 COMMISSIONER CLOWE:  -- nobody else will. 
10                 MR. WHITTINGTON:  Exactly.
11                 COMMISSIONER CLOWE:  But my -- always my 
12   desire is for you to have the understanding, this is not 
13   the venue for you to speak up in.
14                 MR. WHITTINGTON:  That's right. 
15                 COMMISSIONER CLOWE:  You and I have had 
16   that conversation --
17                 MR. WHITTINGTON:  Okay.
18                 COMMISSIONER CLOWE:  -- and you know that.
19                 MR. WHITTINGTON:  Well, I'm just throwing 
20   that out.  I mean, that's -- we can definitely work on 
21   that.  We got to get out there.  I mean, we really got 
22   to show them what bingo is all about and what is needed 
23   for these charities to make it better.  Now, a 
24   percentage going to the State on tax to help schools and 
25   stuff, that's great, too.  But what about these 
0024
 1   charities, too?  They need some help, too -- help, too, 
 2   and we'd pay the same percentage.  And, yes, we do need 
 3   to be innovative and keep up with everything.  If we're 
 4   not, you're right, we're going to be way behind.  We are 
 5   going to be obsolete, like you said. 
 6                 COMMISSIONER CLOWE:  And the reason that 
 7   I'm concerned about it, I think you -- you folks have a 
 8   great opportunity.  It's that you want more money to go 
 9   to those charities.
10                 MR. WHITTINGTON:  Yes.
11                 COMMISSIONER CLOWE:  And if you say that 
12   and you make that a reality, I think that's a pretty 
13   strong selling point.  You know, we heard compelling 
14   testimony right here in this room.  When we were talking 
15   about this issue of the mandatory contribution, we had 
16   some people who said, you know, "We don't get much, but 
17   what we get is so important to us."  There was one lady 
18   who came down.  I think they have a 12-bed battered 
19   women facility in Dallas.  She said, you know, "If we 
20   lose this contribution, we're going to have to close."  
21   That's compelling.  And I've quoted her testimony to a 
22   number of legislators.  That's strong. 
23                 MR. WHITTINGTON:  That smoking ban in 
24   Dallas, it's close -- in one year two halls -- I'm just 
25   counting the halls that I represent in Dallas -- they 
0025
 1   lost $300,000 between the two years just on that.  So 
 2   it's really tight, and bingo is just -- I mean, I know 
 3   Billy got the figures.  It's down.  It's way down. 
 4                 COMMISSIONER CLOWE:  And you see --
 5                 MR. BENNETT:  I'm sorry, Commissioner.  I 
 6   do want to keep y'all focused on the one agenda item 
 7   that we're on. 
 8                 COMMISSIONER CLOWE:  That's fair.  That's 
 9   fair.   And these are the kinds of things that if we 
10   have a joint meeting, you know, we can get into them, 
11   and we can talk about them where Ridgely is exactly 
12   right in stopping us at this point because the public 
13   hadn't been notified that we were going to talk about 
14   these things, and the public is entitled to be here and 
15   hear the conversation and enter into it if they want to.
16                 MR. WHITTINGTON:  Yes.  That would be 
17   great.
18                 COMMISSIONER CLOWE:  Thank you. 
19                 CHAIR TAYLOR:  On a personal note I would 
20   love to have a joint meeting.  Billy and I had a long 
21   discussion about this but without contacting y'all, 
22   which I wasn't supposed to do, and asking what you 
23   thought about it, this was the only way to ask if you 
24   thought it was a good idea, too, because I feel like we 
25   have a lot that we would like to contribute.  And we 
0026
 1   know that Commissioner Cox has been in the gaming 
 2   business, and he might have a lot he can contribute to 
 3   us.  But it is hard.  It's disjointed when we can only 
 4   talk to you one person at a time, so I personally --
 5                 MR. MOORE:  I got a comment.  
 6   Commissioner, you're dead on.  Everything you said is 
 7   absolutely happening right now.  I know everybody in 
 8   this room probably could back you up 100 percent.  I 
 9   want to know how we develop an agenda for something like 
10   this.  Would we do it here, or would it be done -- 
11   Billy, would the staff? 
12                 MR. ATKINS:  If I can start to address 
13   that because I think this is leading to a comment that I 
14   wanted to make before you left, Mr. Chairman.  I still 
15   don't know that we're getting to where you want to be, 
16   and I think Danny's question kind of raises that issue, 
17   I think.  You know, you mentioned in your comments you 
18   don't want to, you know, talk about the same things that 
19   we've been talking about all along, and so far the 
20   issues that have been raised are the same things that 
21   we've been talking about all along. 
22                 I know that the commissioners in meetings 
23   have talked about their specific expectations of the BAC 
24   as opposed to some sort of trade association, and so I 
25   don't know if Danny's comment is something that falls 
0027
 1   more under a trade association versus what it is the 
 2   Commission is specifically looking for from the BAC 
 3   members.  And I think that in a lot of ways that's even 
 4   different than the staff.  Again, the BAC is the 
 5   Commission's BAC.  They're not the division's advisory 
 6   committee.  And -- but what the staff has done is looked 
 7   to the members of the BAC as representatives of the 
 8   bingo industry, as you've mentioned several times, in a 
 9   sense to get the broadest input we can on regulatory 
10   issues which, like you mentioned earlier, we're required 
11   to do.  We're a regulator.  We have to have rules.  We 
12   have to have expectations.  It's not going to go away. 
13                 So we've been seeking that input.  We've 
14   been trying to develop a methodology with the advisory 
15   committee where we can receive that input in an 
16   efficient manner.  And from a staff standpoint, I think 
17   that's something that we're to a degree still struggling 
18   about because what we will ultimately take will go to 
19   you, the commissioners.
20                 So I, at least in my own mind, I'm not 
21   sure I fully understand what the Commission's 
22   expectations of the advisory committee are, vis-a-vis, a 
23   trade association or some other type of lobby group. 
24                 COMMISSIONER CLOWE:  Well, Billy, I would 
25   start out by saying I understand that lack of clarity on 
0028
 1   your part.  And, you know, I'm a generalist, and I 
 2   sometimes start down a road, and I'm not sure where I'm 
 3   going, but I always try to end up where I want to be.  
 4   And my answer to you would be that I think I see this as 
 5   a process.  I see it as an educational process.
 6                 I've been in, as I said, the business of 
 7   being regulated for a lot of years.  I've been in the 
 8   business of being a regulator for a few years.  And to 
 9   my knowledge, when I became the designated bingo 
10   commissioner, there never was the attendance at a BAC 
11   meeting on a regular basis of a commissioner.  I think I 
12   started that activity, and I learned a whole lot by 
13   being in these meetings. 
14                 And then we started into the regular 
15   session, and there were a lot of wants and needs 
16   expressed.  And I came to the meetings, and I can 
17   remember the one just across the street over here where 
18   we had tremendous attendance, and I gave kind of a 
19   heated presentation about, "You're in the wrong place.  
20   You got to go to another place."  That's an educational 
21   process. 
22                 And I feel that obligation as a state 
23   official and a lottery commissioner to not just do to a 
24   certain extent what I think you and the staff do and 
25   say, "That's not our responsibility," and you're right 
0029
 1   in saying that.  But you're a bureaucrat charged with a 
 2   responsibility of living with a Bingo Enabling Act.  A 
 3   commissioner is a policy advisor, and a commissioner has 
 4   a broader scope than a division director. 
 5                 A commissioner has limitations.  A 
 6   commissioner cannot advise the industry to go out and 
 7   form a trade association.  And you mentioned that a 
 8   couple of times, and I want to make it very clear 
 9   there's no inference of anybody saying you need to go 
10   out and form a trade association and let that be your 
11   spokes entity at all.  I'm speaking to you as members of 
12   the BAC, and I have spoken to employed lobbyists who 
13   represent parts of the bingo industry, and I have spoken 
14   to many individuals who have come in here to talk with 
15   me individually.  But what I'm hopeful of achieving -- 
16   and I'm trying to get to the answer to your question -- 
17   is better communication and better knowledge on the part 
18   of the bingo industry members so that when we go into 
19   this next regular session, they don't get run off and 
20   left by whatever legislation may get passed, and some 
21   beneficial result can come to them if there is change in 
22   the gaming laws in this state, which in the case of 
23   bingo will benefit the charities.
24                 The State of Texas is going to look out 
25   for itself.  If we get some kind of change in the 
0030
 1   Lottery Act, it will benefit the State of Texas.  But 
 2   nobody in my mind is going to say -- turn around to the 
 3   bingo and say, "Now, what do you folks need?"  I mean, 
 4   you got to say that. 
 5                 That's where I come from in the trucking 
 6   industry.  I was in Austin during the regular session 
 7   frequently, and I was calling on the members of the 
 8   legislature saying, you know, "The interstate weight 
 9   limit has been increased to 80,000 pounds.  The state 
10   limit is 58,420 pounds.  We need 80,000 pounds."  And 
11   members of my industry, my colleagues, came with me, and 
12   we got it. 
13                 That's the process that I have continually 
14   talked with you folks about, and that's the education.  
15   That's the policy view.  And, again, I think 
16   Commissioner Cox may have a different view of it than I 
17   do, and I think Commissioner Olvera may have a different 
18   view than either one of us.  But to my mind this is an 
19   offer of help.  It's an offer of the opportunity to sit 
20   down and discuss these things and give you the best 
21   knowledge that we can, and then it's up to you to do 
22   with it what you will, and your industry should benefit 
23   from this.  And if we have an agenda -- back, Danny, to 
24   your question.  If we have an agenda, I would like to 
25   see public comment on the agenda so that members other 
0031
 1   than the BAC and the Commission can come and can talk to 
 2   this group about things that they think are important. 
 3                 We've got to -- we've got to ask people 
 4   not to be repetitious and not to talk about one specific 
 5   need.  And, Larry, I know the smoking thing in North 
 6   Texas is hurtful, but, you know, that's a city and 
 7   county regulation.
 8                 MR. WHITTINGTON:  That's the city, right.
 9                 COMMISSIONER CLOWE:  You know, I go to 
10   Dallas frequently, and I love to go in a restaurant 
11   where they had a bar that people can smoke at.  And I 
12   asked them the other night when I was in there, I said, 
13   "What's this smoking ban?"  "Oh," they said, "it's 
14   killed us," you know.  I think the law is you've got to 
15   get over 60 percent food sales now to have smoking in 
16   your bar or something.
17                 MR. WHITTINGTON:  I mentioned that because 
18   of the money loss.  That's the only reason why --
19                 COMMISSIONER CLOWE:  Yeah.  But, you know, 
20   we've got to have the help of the public if we have this 
21   meeting so we don't get off on a rabbit trail and lose 
22   focus on what are the big issues.
23                 MR. WHITTINGTON:  I think it would be 
24   great for us to come together in one accord, the 
25   commissioners, the staff, as well as the Bingo Advisory 
0032
 1   as well as the public to know what bingo is all about 
 2   and Texas to learn more about it and really know about 
 3   what goes on. 
 4                 COMMISSIONER CLOWE:  And, you know, I 
 5   think Billy's question is a good one, and I've tried to 
 6   give him an all-inclusive answer.  But we may have a 
 7   meeting, and we may say, "That didn't do any good at 
 8   all."  You know, "That was a waste of time." 
 9                 But at least I as one commissioner will 
10   feel better about it going into the regular session when 
11   these big issues are going to hit the table and then 
12   when I have to vote at the end of August on whether to 
13   give this organization life again for some period of 
14   time.  I feel that commitment.
15                 CHAIR TAYLOR:  I think that one of the 
16   things that Billy had talked about to me is the 
17   Commission felt like the Bingo Commission asks for 
18   things that would require a legislative change, and I 
19   know that's frustrating to the commissioners.  But I 
20   think the reason that you hear that over and over again 
21   is because since you are a resource when the legislators 
22   ask you what could help, we feel like -- and I think as 
23   an industry -- if we don't keep saying we need 
24   advertising, we need new technology, we need this, that 
25   maybe somebody will forget to mention that to the 
0033
 1   legislators.  When they look to you as a resource, we're 
 2   hoping that those things, if they're mentioned often, 
 3   are at forefront of your mind.  But I know it's 
 4   frustrating because there's nothing you can do about it.
 5                 COMMISSIONER CLOWE:  Suzanne, that's a 
 6   great point, and let me give you some comfort on that.  
 7   When Billy and Reagan and I go call on the 
 8   legislators -- and we do -- it's always me starting the 
 9   meeting, and then Reagan speaks about lottery, and then 
10   Billy speaks about bingo.  And they try to keep me 
11   quiet, but I usually get in there, and I always say, 
12   "And bingo needs help."  And Billy is very good on that, 
13   and we are constantly reminding the legislators when we 
14   have our visits with them.  And they ask us, you know, 
15   what -- and Chairman Solomons, the chairman of the 
16   Sunset Commission, asked us when we appeared before 
17   them, you know, "What can we do for bingo?  What can we 
18   do to get the charities more money?" and we've tried to 
19   be responsive to him on that.  So we can be that 
20   resource, and I can give you comfort that we are not 
21   asleep at the switch on that.
22                 But the driving force will be for the 
23   members of the industry to carry that load to the 
24   Capitol.  And it's beneficial when you say to us, "Now, 
25   we're over there.  We're trying to do this.  We're 
0034
 1   trying to sell that," and we're working with you to make 
 2   sure that you can implement it, you're okay with it.  
 3   There's the cooperation that I see in any agenda that 
 4   you put forward as proposed legislation. 
 5                 And there's a lot of experience here, as 
 6   well as in those who represent you, where you as 
 7   business people don't have a lot of that legislative 
 8   experience, and there's an art there of asking for what 
 9   is reasonable and getting to a point of compromise that 
10   you can live with.  The legislative process is an artful 
11   thing, very artful, and you need help as you go through. 
12                 CHAIR TAYLOR:  Steve, did you want to say 
13   something?  
14                 MR. BRESNEN:  If you don't mind. 
15                 COMMISSIONER CLOWE:  If you-all have asked 
16   me the questions you want, I don't want to sit at the 
17   same table with him.  I'm just kidding.
18                 MR. BRESNEN:  Sure you do.  And by the 
19   way, I'm going to say nice things about you. 
20                 COMMISSIONER CLOWE:  Uh-oh.  Now I'm 
21   really worried.
22                 CHAIR TAYLOR:  Thank you so much.
23                 COMMISSIONER CLOWE:  Thank you all very 
24   much.
25                 MR. BRESNEN:  Mr. Chairman, as I told you 
0035
 1   yesterday, this may be the most important couple of 
 2   discussions that have been had in the time that I've 
 3   been involved with bingo, and we really, really 
 4   appreciate it, and we feel like -- we feel like you've 
 5   gone above and beyond the call to take an interest in 
 6   charitable bingo. 
 7                 And I know we're on an agenda item.  There 
 8   is an agenda item on there for alternative styles of 
 9   bingo, and I don't know if I'll be here by the time you 
10   do that because I do have another appointment later.  
11   Other people will be.  But I guess on the item that 
12   we're on, I would like to say that if we could have 
13   ample notice of the date, there is a coalition to revive 
14   charitable bingo that's been formed, and a number of 
15   people in the room have been actively involved in it.  
16   It's sort of a late response to a call that Danny made 
17   two years before we did it.  But we have gotten 
18   manufacturers, distributors, lessors, charitable 
19   organizations, people that have never been involved and 
20   people that are not involved in bingo now to put their 
21   time and their money and their other resources into a 
22   pot to advocate for new games for charitable bingo.  And 
23   I would like to be able to -- at that joint meeting to 
24   be able to make the BAC and the Lottery Commission aware 
25   of all the work that's been going on behind the scenes 
0036
 1   to bring that about. 
 2                 And I'll -- I have to say that, Billy, you 
 3   and your staff without reservation have been extremely 
 4   helpful within your limits in providing physical notes, 
 5   in reviewing legislation, in trying to go through the 
 6   Class II, Class III issue and all these complicated 
 7   issues.  But there is a movement going on.  There are 
 8   ten lobbyists who are paid by various people, again, 
 9   some who are involved in charitable bingo today and some 
10   who are not. 
11                 We have petitions from probably right now 
12   about 450 of the organizations and people involved with 
13   the organizations that are involved in charitable bingo 
14   today, and we're rocking and rolling, and we were 
15   working feverishly during the special session to make 
16   sure that bingo doesn't get rolled under by VLT 
17   legislation. 
18                 We would like to be able to come -- and so 
19   if you would, we would like -- I don't know what the 
20   mechanism for the agenda is, again, but when you do 
21   that, we would like for the coalition to revive 
22   charitable bingo to be one of the participants in that 
23   meeting to be able to go through kind of jot and tittle 
24   what we've been -- what we've been up to. 
25                 Part of the discussion yesterday -- and I 
0037
 1   think it would be helpful for this discussion to occur 
 2   at this joint meeting -- was that we're -- when House 
 3   Bill 2519 last time and with the legislation that we're 
 4   working on this time, we're trying to bring as many 
 5   efficiencies out of the current format of the BEA as we 
 6   can, and we're try to pare it down to the essentials.  
 7   Unit accounting was largely about that, and, God 
 8   willing, the IRS will tell us something one day, and 
 9   that will explode. 
10                 But there's a lot of things going on.  I'm 
11   hoping that Representative Chairman Flores's committee 
12   report will be approved and out by then because that's 
13   sort of the format for the next reforms and the next 
14   efficiencies that can be done and would be good for this 
15   joint -- at this joint meeting to be able to discuss 
16   those things and how we're going to go forward. 
17                 We had a meeting with Billy and Phil and 
18   Nelda and probably other people -- or at least one 
19   meeting, maybe two or three -- trying to come up with 
20   recommendations for that report, so it would be good at 
21   that meeting if a discussion of what's going on both 
22   with what has transpired in the Sunset process and what 
23   is transpiring at the committee level, particularly 
24   Chairman Flores's committee in the House could be 
25   brought to bear on that. 
0038
 1                 I'm a little bit embarrassed that we 
 2   have -- and members of the coalition have not done an 
 3   adequate job of keeping the lottery commissioners 
 4   informed about our efforts, and we are certainly going 
 5   to do that, and -- because there is a lot going on, but 
 6   I think Chairman Clowe is right.  We've all got to be 
 7   pulling in the same direction. 
 8                 So anyway, I won't go any further on this 
 9   agenda item, but I did want to say if you'll give us 
10   adequate time to get members of the coalition here and 
11   make a presentation and, two, make sure the coalition 
12   and then the legislative and Sunset activities are on 
13   the agenda so you can get a complete picture.  Thanks a 
14   lot.
15                 CHAIR TAYLOR:  Thank you.  Is there any 
16   other discussion on the subject?  Any other public 
17   comment?  We're going to leave this item and come back 
18   to it later this afternoon when Commissioner Cox can be 
19   here to join us.
20                 Okay.  We'll go on to Item No. 3 then, 
21   "Consideration of and possible discussion and/or 
22   recommendation to the Texas Lottery Commission on the 
23   vacant charity representative position on the Bingo 
24   Advisory Committee."  And, Kimberly, that would be you.
25                 MS. ROGERS:  Thank you.  I would just like 
0039
 1   to say we contacted all the individuals that were listed 
 2   that supplied us with their nomination forms, and we 
 3   spoke with a few of them, all that we could reach.  Our 
 4   recommendation would be Mr. Thomas Weekley.  He is -- he 
 5   lives in McAllen.  Excuse me.  He seems very anxious to 
 6   help the bingo industry, and what we're all here for is 
 7   to help charities, you know, benefit more.  I don't know 
 8   if he's here.  Did he make it today or -- okay. 
 9                 Mr. Moore also spoke with him on the phone 
10   and agrees that he seems pretty anxious to help and 
11   assist in the areas that we need assistance in. 
12                 MR. MOORE:  Yeah.  There was some other 
13   gentleman I talked to, Melvin Banks, but he's in 
14   Texarkana.  He was questioning whether he could make it 
15   or not down here on meeting dates.  He didn't realize 
16   they were all in Austin, so we need people to attend 
17   meetings --
18                 MS. ROGERS:  Right.
19                 MR. MOORE:  -- and Mr. Weekley was anxious 
20   to do that.
21                 MS. ROGERS:  And he had no problems with 
22   being able to attend meetings.  A few people could not 
23   take on such a string of phone calls and things of that 
24   nature, but we did include their applications in here.  
25   I will say that everyone, you know, has experience in 
0040
 1   bingo and all, but they just sometimes had a few 
 2   problems with being able to make it at all times, so -- 
 3   do we --
 4                 CHAIR TAYLOR:  Okay.  What we need to hear 
 5   is a nomination by, I guess, one of the committee 
 6   members with a second, and this would be to recommend 
 7   his appointment to the commissioners subject to his 
 8   background.
 9                 MS. ROGERS:  Okay.  I recommend Mr. Thomas 
10   Weekley.
11                 CHAIR TAYLOR:  Check.  That was subject to 
12   his background check.
13                 MS. ROGERS:  Subject to his background 
14   check, yes.  
15                 CHAIR TAYLOR:  Okay.  We have a nomination 
16   by Kimberly.  Anybody second that?  Is there a second to 
17   that?
18                 MR. MANIO:  I'll second that motion.
19                 CHAIR TAYLOR:  Mario.  All in favor?
20                 THE COMMISSIONERS:  Aye.  
21                 CHAIR TAYLOR:  Any opposed?  Okay.  Then 
22   we'll go on to Item No. 5.  I guess we -- this will go 
23   to the next commission meeting.   Okay.  Correction.  
24   Item No. 4.  Yes, please. 
25                 MR. ATKINS:  Members, you have in your 
0041
 1   notebook, there are three positions that are expiring 
 2   effective February 1st, 2005.  Pete Pavlovsky, the seat 
 3   that you just filled, and Mario's terms are up in 
 4   February of 2005.  We have already issued notice on the 
 5   web site as well as the Bingo Bulletin and assume that 
 6   we will be getting nominations, and we'd just like for 
 7   record-keeping purposes to make sure that the BAC is 
 8   aware of those upcoming vacancies and, if it's the 
 9   desire of the committee, retain the existing nominations 
10   committee to review any nominations that may come in.  
11   Having said that, I haven't checked to see if any 
12   members of the previous nominating committee are those 
13   with expiring terms.  It was Kimberly --
14                 MR. MOORE:  Myself and Pete. 
15                 MR. ATKINS:  Okay.  It would probably not 
16   be best just for appearance sake to have someone whose 
17   term is expiring serve on the nominating committee, so 
18   you may want to seek to replace Pete.  Something that 
19   the Chair and I also discussed is that there are no 
20   provisions in the administrative rule as it relates to 
21   term limits, so should any of those members whose terms 
22   are expiring express an interest in continuing to serve, 
23   I believe they would be eligible for consideration.  
24                 MR. MOORE:  Okay. 
25                 CHAIR TAYLOR:  Okay.  We need to replace 
0042
 1   Pete on the nominating committee.  Do I hear a 
 2   volunteer? 
 3                 MR. DOUGHERTY:  I thought we just did.  
 4   Didn't Pete --
 5                 MS. ROGERS:  No, to assist Daniel and 
 6   myself.
 7                 MR. DOUGHERTY:  Weekley replaced Pete.  
 8   Isn't that what you said? 
 9                 CHAIR TAYLOR:  No, no, no.  He's going to 
10   be the new member.  What we're looking is the nominating 
11   committee.  We still need to nominate people for two 
12   other positions that are coming open, so we need one 
13   further member -- 
14                 MR. MOORE:  I don't think we need another 
15   member.
16                 MS. ROGERS:  No.  I agree.  I think we 
17   would be fine. 
18                 CHAIR TAYLOR:  Is there a problem with 
19   that?  Okay.  Then it will continue with just Kimberly 
20   and Danny.
21                 Item No. 5, "Report and possible 
22   discussion on calendar year 2004 third quarter and/or 
23   calendar year 2004 bingo financial information and 
24   statistics."  Billy was going to talk about that. 
25                 MR. ATKINS:  Members, you have in your 
0043
 1   notebook the third quarter 2004 spreadsheets.  As you 
 2   know, the third quarter of 2004 ended September 30th 
 3   with the due date of the conductors' reports being 
 4   October 25th.  In your notebooks for this item is the 
 5   following information that is after the cover memo from 
 6   Terry Shankle. 
 7                 The first is a one-page spreadsheet that's 
 8   titled "Quarterly Comparison."  The top half of the 
 9   spreadsheet compares the third quarter of 2003 to the 
10   figures for the third quarter of 2004 with the bottom 
11   half of the spreadsheet comparing the second quarter of 
12   2004 to the third quarter of 2004. 
13                 Behind that is another spreadsheet that's 
14   titled "Quarterly Comparison Detail Report," and this 
15   spreadsheet shows each quarter broken down by year. 
16                 Referring back to the first spreadsheet, 
17   the top half of the quarterly comparison shows decreases 
18   in all categories except for instant bingo sales, which 
19   were almost 19 percent greater than the third quarter of 
20   2003, and instant bingo prizes awarded, which were 20 
21   percent higher than the third quarter of 2003. 
22                 However, if you look at the bottom half of 
23   the spreadsheet, you'll see the total gross receipts for 
24   the third quarter of 2004 are down from the second 
25   quarter by 8.3 million or just over five and a half 
0044
 1   percent.  The bottom half of the first spreadsheet, in 
 2   fact, shows decreases across all categories for the 
 3   third quarter of 2000 (sic):  sales, prizes, 
 4   distributions, and attendance. 
 5                 Now, also as you'll recall, the licensees 
 6   have been reporting approximately six consecutively -- 
 7   six consecutive quarterly increases in instant bingo 
 8   sales since about the first quarter -- I'm sorry -- the 
 9   fourth quarter of 2002, and this is due to the new event 
10   tickets that were authorized by the adoption of 
11   amendments to Charitable Bingo Administrative Rule 
12   402.554 in September of 2002.  This increase continued 
13   until the last quarter when licensees reported the first 
14   decrease in instant bingo sales since the new tickets 
15   had been approved. 
16                 Now, of course, we're going to continue to 
17   monitor this particular line item, but it appears at the 
18   time, anyway, that although instant bingo sales remain 
19   higher than in the recent past, the newness of the event 
20   ticket seems to be wearing off, and we don't expect to 
21   see the continued quarterly increases that we've 
22   experienced in the past.  And Terry Shankle, the 
23   accounting services manager is present, and she'll be 
24   happy to answer any questions you may have about any of 
25   the information on the spreadsheet. 
0045
 1                 CHAIR TAYLOR:  Is there any comment on 
 2   this from the members of the committee? 
 3                 MR. MOORE:  It definitely reflects what's 
 4   going on out there.  No question. 
 5                 CHAIR TAYLOR:  We have a witness 
 6   affirmation form from Steve Bresnen.  Is there any other 
 7   public comment? 
 8                 MR. HEINLEIN:  I wasn't going to comment 
 9   on that one, but since nobody else is, I will.  David 
10   Heinlein, accountant for approximately 30 charities and 
11   going down.  These statistics, I have not seen them, but 
12   what you just said about them would reflect what I am 
13   also seeing in the different halls, except for the two 
14   halls that we have that does in unit accounting, which 
15   we'll continue to strongly recommend to everyone today, 
16   even though we don't have yet the Internal Revenue 
17   Service -- one of my charities just handed me a letter 
18   from the IRS, and I thought maybe it was our private 
19   letter ruling letter, and I opened it real quick.  It 
20   wasn't, so we still don't have that. 
21                 But we'll still be strongly recommending 
22   unit accounting because those two halls that are doing 
23   that are continuing to show increases in event tabs.  
24   But where the unit accounting is not being done in the 
25   other halls that we do, we're beginning to see a 
0046
 1   decline.  There's some newness wearing off, and there's 
 2   some difficulties, I think, in just promoting the sales 
 3   of those items.  It's difficult to handle the products 
 4   themselves.  They reached a point where they were high 
 5   enough that they could handle them in their regular 
 6   methods of all the different inventories, but we have 
 7   noted that it is -- to go past a certain point, you've 
 8   got to have one inventory to be able to do it.  And so 
 9   we believe that those statistics would be holding.  And 
10   because of their decline in this last quarter, we're 
11   seeing many charities now having to consider getting out 
12   of bingo.  We're expecting several of the charities to 
13   surrender their licenses before the end of this year. 
14                 CHAIR TAYLOR:  David, can I ask you 
15   something?
16                 MR. HEINLEIN:  Sure.
17                 CHAIR TAYLOR:  Do you feel that the reason 
18   the halls on unit accounting are doing better is because 
19   they have a broader inventory of tabs to select from?
20                 MR. HEINLEIN:  Yes.  They have more 
21   products to select from.  It's like Commissioner Clowe 
22   mentioned a while ago.  What I see happening with the 
23   lottery is it seems to me that they have copied what we 
24   did -- done in the event tabs, and they're offering more 
25   products.  They're simply offering many, many more 
0047
 1   products, and they're changing them all the time. 
 2                 And you have the opportunity to do that in 
 3   unit accounting because you can have a much larger 
 4   inventory of product items, whereas in a hall that 
 5   you've got five charities, you've got to have five 
 6   separate inventories, and that's five times the amount 
 7   of inventory.  You're going to be limited to how much 
 8   inventory you have to sell, just being able to 
 9   physically handle the inventory and the processing of 
10   all those products.  We didn't intend that -- or see 
11   that that was going to be one of our benefits in unit 
12   accounting, but it certainly is.  It is a big benefit, 
13   and so we continue to see an increase in our net 
14   proceeds, and also we see an increase in our charitable 
15   distributions, which is the bottom line.  That's what 
16   all of what we're doing is all about is increasing the 
17   bottom line. 
18                 And I testified before the House committee 
19   on the licensing administration, of Kino Flores's 
20   committee that I believe we could double our 
21   contributions to charitable bingo.  Mr. Fenoglio 
22   disagreed with me, but I'll still stick my neck out and 
23   say that because I'm seeing that happen where you're 
24   able to increase the product that you're offering to the 
25   public, you're going to be able to increase your sales, 
0048
 1   you're going to increase your bottom line, and that's 
 2   going to put more money.  That's how you're going to get 
 3   more money to charitable bingo.
 4                 MR. WHITTINGTON:  David, let me ask you a 
 5   question.  I know the new event tickets are going to be 
 6   great, but you also got to have people in the halls to 
 7   play them tickets, and that's the problem we're having, 
 8   just getting the people in the hall.
 9                 MR. HEINLEIN:  That's correct.  And in 
10   those halls where you're giving them more excitement and 
11   more products to purchase, you're going to see an 
12   increase in your attendance.  And those halls that are 
13   not able to offer that, you're continuing to see a 
14   decline in their attendance, and therefore no money 
15   available for charitable distribution.
16                 MR. WHITTINGTON:  Yeah, I know, but at the 
17   same token if you've got these tabs in these halls and 
18   the people are not coming, how -- how are they supposed 
19   to know you got --
20                 MR. HEINLEIN:  You're going to change the 
21   way that you do it.  You're going to bring about an 
22   excitement in the hall where you're going to increase 
23   those sales in event tabs because you're going to bring 
24   more people in, and you're going to bring new people in.  
25   And that's what the lottery is doing.
0049
 1                 MR. WHITTINGTON:  I know.  I know that.  
 2   That's why it -- it still gets back to the same ol' 
 3   thing --
 4                 MR. HEINLEIN:  We need to look at success 
 5   and copy it.
 6                 CHAIR TAYLOR:  So you have seen the 
 7   attendance go up in the halls? 
 8                 MR. HEINLEIN:  Yes, I have.
 9                 CHAIR TAYLOR:  What -- any percentage? 
10                 MR. HEINLEIN:  Very small but at least 
11   it's not declining like all the other ones.  And as the 
12   other ones continue to decline, they're having to give 
13   serious, serious consideration of getting out of bingo.  
14   And I have four charities that have said that by the -- 
15   if they can make it to the end of the year, they're 
16   going to get out. 
17                 CHAIR TAYLOR:  Thanks, David.  Steve, did 
18   you still want to talk? 
19                 MR. BRESNEN:  No, ma'am.  I think I'll 
20   pass.  I got to say my piece earlier.  Thank you. 
21                 CHAIR TAYLOR:  Is there any other 
22   discussion on this topic?  Okay.  Then we'll go on -- 
23   I'm sorry, Larry? 
24                 MR. WHITTINGTON:  I want to know what is 
25   the number of charities that have lost -- the last -- 
0050
 1   have turn in the last --
 2                 THE REPORTER:  I'm sorry.  Can you speak 
 3   in your mic?  I can't hear you.
 4                 MR. WHITTINGTON:  I wanted to ask Terry, 
 5   maybe Billy, how many charities has lost their license 
 6   or are in -- in distress this year for -- charity-wise 
 7   this year?  
 8                 MR. ATKINS:  We don't have that 
 9   information with us.  We have access to it.
10                 MR. WHITTINGTON:  David was just speaking 
11   of charities losing their license by not making enough 
12   money, so I wanted to know how many have tendered their 
13   license this year.
14                 MR. ATKINS:  So specifically you're asking 
15   for the number of organizations that have surrendered 
16   their license. 
17                 MR. WHITTINGTON:  Yes.
18                 MR. ATKINS:  Okay. 
19                 CHAIR TAYLOR:  Any other comment? 
20                 Item 6, "Report, possible discussion 
21   and/or action on recommendation by the subcommittee on 
22   two draft proposed new rules pertaining to a Standard 
23   Administrative Penalty Guideline and an Expedited 
24   Administrative Penalty Guideline."  And, Danny, you 
25   chaired this subcommittee. 
0051
 1                 MR. MOORE:  I did.  The subcommittee 
 2   consists of Marshall McDade from the staff, Sandra 
 3   Joseph, Georgia Nobley, and Phil Sanderson.  I'm the 
 4   chairman of this subcommittee.  Suzanne and Mario were 
 5   in on our phone call which we had November 4th.  
 6   Marshall and his staff are -- they've been working on 
 7   this for two, three months now, and it's -- it's a major 
 8   undertaking.  They've done a lot of work here. 
 9                 Obviously they're addressing all the rules 
10   and different laws with the act, and they put together 
11   two rules.  The discussion kind of centered around the 
12   penalty amounts.  Suzanne raised some questions about 
13   that.  Some of the comment -- because it doesn't really 
14   reflect how much the exact amount would be.  Phil stated 
15   that the amounts in there are going to help deter 
16   charities from committing rule violations, and we concur 
17   with that, but still the amounts is what intimidates us, 
18   and I think that's what we're going to probably talk 
19   about a little bit today. 
20                 So, Marshall, I'll turn it over to you. 
21                 MR. McDADE:  Thank you.  Again, I'm 
22   Marshall McDade, the senior audit manager, and, again, 
23   we've been -- first of all, special thanks -- I want to 
24   give special thanks to the staff who put a lot of time 
25   and effort into development of the rule that you have 
0052
 1   before you today.  We've been working on this -- on 
 2   these rules since about February of this year.  We've 
 3   been talking with other state agencies, other states 
 4   about their rules, looking at their guidelines that they 
 5   provide in their areas of regulation, and what we've 
 6   tried to do is work and develop rules that will sort 
 7   of take the best of all the worlds that we can get ahold 
 8   of.
 9                 Along with the work group, the -- our 
10   legal division has been involved with the development of 
11   the rules, so we've been -- like I said, we've been 
12   working since February in developing these rules. 
13                 The rules -- the development of these 
14   rules is really initiated by an issue raised in the 
15   Sunset Commission back in 2002.  One of their comments 
16   related to the Commission not having -- or lacking rules 
17   governing compliance and enforcement procedures, so this 
18   really kind of deals with that enforcement side of it, 
19   and it enables us to provide a structure that helps 
20   ensure that the Commission applies administrative 
21   sanction, including monetary penalties, in a consistent 
22   and fair manner to all licensees. 
23                 It provides us with a method to inform our 
24   licensees of potential sanctions that could be applied 
25   for violation of the act and rules.  And as Danny 
0053
 1   mentioned, it also has a benefit of encouraging and 
 2   deterring -- encouraging compliance with the act and 
 3   rule but also deterring noncompliance with the act and 
 4   rules.  So what you have before you is the results of 
 5   the work since February and the development of 
 6   specifically two rules, a standard administrative 
 7   penalty rule and an expedited administrative penalty 
 8   rule with accompanying documents that would help us to 
 9   apply those rules consistently and fairly to all 
10   organizations, all licensees.
11                 And I guess -- is there -- where would we 
12   need to go from here as far as going through the detail 
13   of the actual rules? 
14                 CHAIR TAYLOR:  I just have one question 
15   before you get into any details.  When you looked with 
16   two other states, was that two other states' bingo or 
17   two other areas of enforcement?
18                 MR. McDADE:  Two other states' bingos just 
19   to kind of see what their rules looked like and --
20                 CHAIR TAYLOR:  And do the other states 
21   have fines that are similar to these fines for 
22   noncompliance with the rules?
23                 MR. McDADE:  Some states are higher, and 
24   some states only apply -- their statutes allow them to 
25   only give suspensions of occasions, so it varied.  We 
0054
 1   tried to develop our policy within the constraints of 
 2   our current Bingo Enabling Act rules and the 
 3   Administrative Procedures Act.
 4                 CHAIR TAYLOR:  And the fines, where did 
 5   you -- where did the amounts come from?  I mean, were 
 6   they just arbitrarily decided, or -- I mean, how did you 
 7   come up with the 1,000 for this and 750 for this and 450 
 8   for that? 
 9                 MR. McDADE:  We looked at -- in Section 
10   602 of our Enabling Act, we talk about -- it talks about 
11   the maximum penalty that could be assigned or assessed 
12   for a violation of the act or rules, and based on our 
13   current statute it's $1,000 per instance, so we sort of 
14   used that as a base of the high point.  And then we 
15   tried to work down from there dealing with the 
16   seriousness of the issue and tried to apply an amount 
17   that we thought would be fair for those particular 
18   violations at different levels of seriousness or impact 
19   to the public or impact to the ability of the 
20   organization to maximize its charitable contributions.
21                 MR. ATKINS:  Or the integrity of the game. 
22                 MR. McDADE:  Yes. 
23                 MR. MOORE:  I want to make a comment.  
24   Marshall, we talked about identifying whether it's a 
25   bingo worker or it's the charity.  Did you guys look 
0055
 1   into that some more yet, or did you have time?  I know 
 2   some of them identify a person or a charity, but I think 
 3   we were going to look through that some more.
 4                 MR. McDADE:  Yeah.  We didn't get a chance 
 5   to go through and specifically identify which ones are, 
 6   but as I recall, really the only ones that deal with the 
 7   individual worker are the violations dealing with the 
 8   worker not being on the registry and the worker not 
 9   wearing his badge.  Those are the two major statutes or 
10   parts of our act that deal with the individual worker. 
11                 MR. MOORE:  Okay. 
12                 MR. McDADE:  All the remaining issues are 
13   involved in the organization or some licensee. 
14                 MR. MOORE:  All right. 
15                 CHAIR TAYLOR:  Okay.  I think that we've 
16   all read through these -- I mean, are familiar them.  
17   There's a copy for the general public out there.  I 
18   don't think there's a reason or need to go through rule 
19   by rule any violations unless somebody has a specific 
20   rule.  And there's a lot of public comment, so, 
21   Marshall, I guess you're going to be here available for 
22   that public comment. 
23                 MR. McDADE:  Yes.
24                 CHAIR TAYLOR:  And we'll start with Steve 
25   Fenoglio.  
0056
 1                 MR. FENOGLIO:  Thank you, Madam Chair, 
 2   committee members, the Atkins staff.  My name is Stephen 
 3   Fenoglio.  I filed a witness affirmation.  I'm here 
 4   today representing the bingo interest group as well as 
 5   the group of over 950 charitable and business 
 6   organizations.  I've provided a list in the past.  In an 
 7   effort to save trees, I did not bring it, although I -- 
 8   and I've provided it electronically to the staff in the 
 9   past, and I can bring a copy if I need to.
10                 I was a member of this work group, but 
11   unfortunately the day that it was chosen, I could not 
12   attend.  Phil and I have spoken briefly about it.  I did 
13   provide him with some written comments about at least 
14   the first portion of the rule.  And I don't know how 
15   detailed you want.  I think I can probably talk for two 
16   hours about it, and I hope I don't need to. 
17                 What my overall recommendation is, since 
18   Marshall had said this has been under review since 
19   February -- that I think we ought to have -- I would 
20   recommend -- and it may be more of the BAC as a 
21   subcommittee work on this.  There are a lot of questions 
22   that I have that are big-picture policy questions that 
23   there's no explanation for why you've chosen this course 
24   of action other than we all know that this is a part of 
25   a Sunset Commission recommendation that said in order to 
0057
 1   give licensees notice of what possible penalty ranges 
 2   are available or expected, the agency should have 
 3   guidelines. 
 4                 And I've done a search, and I know the 
 5   legal counsel of the lottery's done the same search or 
 6   similar, and I found about 25 agencies in Texas that 
 7   have guidelines similar to these, although I think these 
 8   are by far the longest and most exhaustive, which is one 
 9   of the concerns I have is it's too much.  It's almost as 
10   though in a big-picture analysis -- and I am a hunter -- 
11   taking an elephant gun on a squirrel hunt, if you will.  
12   There's too much detail.  There's too much opportunity 
13   for the unsuspecting, unsophisticated charity -- and it 
14   bears repeating that there are a number of charities out 
15   there that have -- they either operate with unpaid 
16   volunteers, typically senior citizens who do this on a 
17   part-time basis, or have low-paid workers. 
18                 And by way of example -- and I brought 
19   with me copies of three different guidelines -- and I 
20   brought the requisite number of copies and then some -- 
21   of the Lottery Commission's penalty guidelines for 
22   licensing of sales agents, the -- which is 16 Texas 
23   Admin. Code, Section 401.160; the Texas Board of 
24   Architectural Examiners guidelines, 22 Tex. Admin. Code, 
25   Section 1.232; and the Texas State Board of Public 
0058
 1   Accountancy's rules, 22 Tex. Admin. Code, Section 519.9, 
 2   and I'll bring those up. 
 3                 And my point on that is when you look at 
 4   theirs -- and, again -- and these are directly from West 
 5   Law -- the lottery's rules on penalty guidelines are 
 6   actually four pages, and I'm going to go ahead and hand 
 7   those out.  And there are three separate handouts.  The 
 8   Public Accountancy is a total of 11 pages, and the 
 9   Architectural Examiner's Board is a total of five pages.  
10   And if you think about what the CPA's do in this world, 
11   can have far, far harsher results than anything a 
12   charity could ever do.  If you think back three years 
13   ago to the Enron situation and what high-paid CPA's were 
14   doing, and, in fact, one of what was the Big Five 
15   accounting firms is no longer in business because it was 
16   found guilty of multiple criminal violations. 
17                 And the Architectural Examiner's Board 
18   deals with obviously architects.  Buildings can fall 
19   down, people can get killed, and so there are very harsh 
20   consequences for that.  And so those agencies -- and by 
21   the way, the Accountancy Board's rule was adopted in 
22   June of '04.  The Architectural Board's rule was adopted 
23   July 5 -- last time on July 5 of '04.  So they're recent 
24   vintage, and those agencies have gone through and looked 
25   at that and have come up with what is a pretty simple 
0059
 1   approach to a penalty matrix that people could look at 
 2   and get their arms around as opposed to the discrete 
 3   violations that are in the penalty matrix which are 
 4   extremely lengthy. 
 5                 And so, again, one of my recommendations 
 6   is I think that this needs to be scrubbed.  And I'm not 
 7   throwing stones at the staff by any means, but this has 
 8   been too rushed to get it here today.  And I know we 
 9   have another, quote, reading, Billy, where this will 
10   come up again.  And I've talked with -- since I've had 
11   the benefit of this, and I've had a chance to analyze it 
12   and talk with some clients, I think there's a lot of 
13   interest in an intensive work group if we can find a 
14   common day over -- within this holiday period to sit 
15   down similar to what we did on some of the other 
16   rule-makings and have two or three meetings.  Some 
17   people perhaps would be by telephone conference call.  
18   Others would be here in Austin. 
19                 Because it -- in my way of thinking, 
20   having litigated enforcement matters with the agency, 
21   this is a fairly large departure from the current 
22   practice, and I think licensees should have an 
23   opportunity to understand the genesis of it, what's 
24   going on in the staff's mind with it, and then the 
25   opportunity to see, well -- and talk, for example, and 
0060
 1   we could take an audit -- and I have the -- I have 
 2   several audits that I'm representing clients on which 
 3   could lead to enforcement matters where this rule 
 4   wouldn't actually be effective because the audit was 
 5   started before the rule could be adopted. 
 6                 But, you know, there are many times when 
 7   charities -- and, again, volunteers are low-paid 
 8   workers -- have multiple violations, and each violation 
 9   is a repeat offense, so that you could have ten -- 
10   potentially tens of thousands of violations that would 
11   effectively put the charity out of business.  And what I 
12   would like to have the opportunity to do, not 
13   necessarily at a public meeting now, but to sit down 
14   with -- and I know Phil is one of the leaders and 
15   Marshall.  Let's talk about a real-life situation where 
16   a charity has transposed a number, and they've done it 
17   several times.  In one of the provisions in this rule, 
18   it talks about if you've had the same violations within 
19   48 months, the penalty gets worse.  Well, having seen 
20   audits occurring regularly, some charities are going to 
21   have the same problems over and over and over again.  
22   That's not that they're derelict in their duties, but, 
23   again, you look at the type of workers that are doing 
24   some of those jobs, they're getting paid 8, $10 an hour.  
25   These are not high-paid -- which equates to less than 
0061
 1   $20,000 a year, and these are part-time as well.  20,000 
 2   a year if they were paid full-time 8 to $10 an hour. 
 3                 But you're going to have those problems, 
 4   and what I don't want to have is everyone were to say, 
 5   "Well, let's go ahead and adopt it because Sunset said 
 6   we had to do it.  We want to do it before the 
 7   legislative session gets too far along," and then lo and 
 8   behold six months or a year from now when perhaps Billy 
 9   is in a different job and Phil is in a different job, we 
10   have someone new, and they're trying to wrestle with 
11   this and say, "Well, but it says I can go up to $1,000 a 
12   violation for a transposition error, and this is the 
13   third time that we've had either an audit or a review, 
14   and this charity has done it, and we're tired of dealing 
15   with it, so it's $1,000 a violation on your license 
16   application."  How many times has staff seen where a 
17   telephone number or a social security number or a 
18   driver's license number is transposed?  And that's a 
19   violation, and it's subject to up to a $1,000 penalty. 
20                 I'm not suggesting, Billy, today -- and I 
21   certainly hope you wouldn't, and you can speak for 
22   yourself as you are quite capable of doing.  I'm not 
23   suggesting that this administration today would say 
24   that's a $1,000 penalty.  It says "up to."  But what I 
25   don't want to -- I want to worry about not only today 
0062
 1   and the next six months but the next several years we're 
 2   going to have to work with this when people come and go 
 3   at this administration, and that's one of the concerns I 
 4   have. 
 5                 These are charities, and they're using 
 6   volunteers or low-paid workers, and I think we're -- 
 7   this rule anticipates holding them to a very high 
 8   standard, a much higher standard than perhaps the -- if 
 9   you wanted to look at comparisons of the CPA Accountancy 
10   Board for some of the violations is just a warning 
11   letter, and there's no reference in here to a warning 
12   letter.  Now, that may be one of the recommendations 
13   that staff is thinking about, but it doesn't say a 
14   warning letter in here.  And, again, in this CPA 
15   Accountancy Board there is a reference that this type of 
16   violation is a warning letter up to perhaps something 
17   else.
18                 So having said that, I have exhaustive 
19   comments.  We can go section by section, line by line, 
20   or, again, my preference would be not to exhaust -- and 
21   I know there are other people who want to talk about 
22   it -- not to exhaust all of those issues.  I think those 
23   issues would be better discussed in a working group.  
24   And we do have time -- I'm assuming the next BAC meeting 
25   is going to be sometime after the first of the year, and 
0063
 1   I know holidays are difficult.  I'm in Austin, so it's 
 2   probably a little easier for me to meet than some of the 
 3   other people, but I think it would lend itself to a 
 4   round-table discussion.  And I'm comfortable with doing 
 5   the round-table discussion now, Madam Chair, if that's 
 6   what you want to do, but what I would like to do is be 
 7   able to ask either Marshall or Phil or Billy a lot of 
 8   questions about, "Why did you do it this way?"  "What 
 9   were you thinking of when you drafted it this way?" 
10                 There's no -- in here just by way of -- 
11   the easiest example is on page -- and I'm sorry.  My 
12   comments have been revised, and I know the current 
13   comment -- it's the Standard Administrative Penalty 
14   Guideline.  It's No. 1101, which is page 4 of 14 of the 
15   period -- or of the handout.  "A person knowingly 
16   participated in the award of" -- focus on the word 
17   "knowingly."  That suggests, you know, someone had some 
18   forethought to do that. 
19                 The next person -- the next violation 
20   is -- it doesn't have a "knowingly" or "intentionally," 
21   and my suggestion would be at least a "knowingly" and 
22   "intentionally" standard.  What was going on in the 
23   staff's mind when they chose the word "knowingly" on 11 
24   -- 101 and didn't have a knowing violation -- a -- we 
25   lawyers talk about a mens rea, a bad mind.  
0064
 1   Intentionally I'm going to mislead the agency.  I think 
 2   that's a different result than one that's just, I 
 3   transposed a letter under 1102.  You made a false 
 4   statement on the application for the license.  One of 
 5   Larry's charities files a renewal application.  They 
 6   transpose a number.  That's a violation.  That's up to a 
 7   $1,000 violation.  And, again, I'm not suggesting that 
 8   that would be the automatic result.  I would certainly 
 9   hope it wouldn't be.  But those are the type of 
10   questions that I would like to have the opportunity in a 
11   roundtable to kick the tires perhaps repeatedly and go 
12   through those issues. 
13                 And, again, Madam Chair and other 
14   committee members, if you want to do that today, I'm 
15   prepared to do it, but it will take -- from what I would 
16   like and what my clients would like to have the benefit 
17   of so we can file written comments at the appropriate 
18   time, you know, some of that -- the benefit of where the 
19   staff is coming from. 
20                 MR. ATKINS:  I can attempt to answer some 
21   of those questions.  The first one, Steve, is in terms 
22   of the language that's in the table, it's taken from 
23   statute, so that's why Violation 1101 has "knowingly," 
24   whereas 1102 doesn't because that language isn't 
25   contained in the statute.  That's the answer to that 
0065
 1   question. 
 2                 In terms of the ability to discuss it -- 
 3   you know, the staff's open to doing it however the work 
 4   group and the BAC want to.  Our intent has been to, you 
 5   know, put this as a discussion document on the web site.  
 6   We're having some formatting problems.  That's what's 
 7   slowing it down.
 8                 MR. FENOGLIO:  I understand.  Yeah.
 9                 MR. ATKINS:  But our intent is to put it 
10   out there.  The staff's able to move forward whatever 
11   way the work group and the advisory committee want to.  
12   The only thing that's going to trouble the staff is if, 
13   you know, we then take, you know, this additional time 
14   for these work sessions or whatever and then find 
15   ourselves back at another BAC meeting and wanting to do 
16   the same thing all over again. 
17                 So if it's the desire of the work group, 
18   the BAC to hold these, I guess, work sessions that 
19   Steve's alluding to, I think that's fine by us.  But 
20   when we come back, we're going to be looking to move 
21   forward.  You know, again, once -- once it goes to the 
22   Commission for recommendation for publication, there's 
23   still going to be opportunity for comment all along the 
24   line, and, you know --
25                 MR. FENOGLIO:  And my thought, Billy, is 
0066
 1   not to hold up the process at all.  I think it will 
 2   actually simplify the process.  If you look at some of 
 3   the recent rule makings we've gone to where we've had 
 4   this, it's actually, I think, simplified these meetings.  
 5   It's simplified certainly the comments at the commission 
 6   meetings. 
 7                 And I don't know what the result will be 
 8   because we have not had an opportunity -- I know Phil 
 9   was out of town.  I've been out of town -- to sit down.  
10   I'm not going to tell you where we'll end up with, but I 
11   think the opportunity to sit down and talk and chew the 
12   fat on these issues helps. 
13                 I can tell you from one recent 
14   rule-making -- and I can't remember what it was -- where 
15   the BAC desired to hold it back for additional comment 
16   period and the staff took it to the Commission, and 
17   that's the -- that's the program the staff has put in -- 
18   or that the Commission has put in place, and I'm 
19   comfortable with that. 
20                 If it turns out that at the next BAC 
21   meeting I still don't like it and want it held up, and 
22   the BAC says, "It's going," or maybe the BAC says, "We 
23   don't think it's going," the staff can bring it to the 
24   Commission at that point.  That's the policy that's put 
25   in place.  I'm comfortable with that.  I just think this 
0067
 1   is a -- from my perspective sitting on my side of the 
 2   table, this is a radical change, and I think it deserves 
 3   a lot of measured comment. 
 4                 And putting it on the web site I like a 
 5   lot.  And by the way, I would strongly recommend that 
 6   you also put on the web site all the handouts that the 
 7   BAC gets so that people who want to look at it and come 
 8   more prepared can do so before, you know, they walk in 
 9   at 9:00.  And I know that's a management of your 
10   resources, Billy.  You know, you don't have a blank 
11   check. 
12                 MR. ATKINS:  That's what I was --
13                 MR. FENOGLIO:  You don't have a blank 
14   check, but that would certainly help.  I mean, several 
15   people were asking earlier about some of the other 
16   comments, "Well, do they have a handout?"  "Well, no, 
17   they don't."  It was the bingo numbers.  I happened to 
18   obtain it because I had filed an open records request 
19   and got it for the commission meeting yesterday.  I'm 
20   assuming it's the same one. 
21                 But back to the point, it's good to put it 
22   on the web site, but I don't think there's anything near 
23   the benefit to the industry to having the opportunity to 
24   pick -- pick and choose three to five people within an 
25   industry group to meet with staff and you.  There's a 
0068
 1   synergy that occurs when -- and something that I might 
 2   ask might prompt a comment from Suzanne that she hadn't 
 3   thought about and so on and so forth, or Suzanne most 
 4   likely raises a question that I hadn't thought about, 
 5   and it furthers that discussion.  So I don't want to 
 6   slow the process down.  That's not my point.  But I 
 7   think it deserves that type of measured activity.
 8                 MR. ATKINS:  Well, and the purpose of the 
 9   staff bringing the draft forward today, Steve, is to 
10   generate just that comment because the staff, as 
11   Marshall mentioned, has had this on several previous 
12   agendas for the BAC, haven't been in a position to bring 
13   it forward at that time.  We are now.  I think what we 
14   would prefer to do is defer to the work group and the 
15   committee on how they want to proceed if they -- 
16   because, again, this is the -- this is the first -- the 
17   first go-round of it.  So if the subcommittee wants to, 
18   you know, we can, holding additional work groups.  I 
19   didn't know -- I think Phil wanted to comment. 
20                 MR. FENOGLIO:  And while Phil is coming 
21   up, I will tell you that Marshall had mentioned to me 
22   several times when I happened to be over here, "We're 
23   about ready to talk about in detail and give you a copy 
24   of this," so I knew it was coming.  It's just -- it's 
25   not -- it's been premature to have the lengthy 
0069
 1   discussion, and I think about Friday of last week I did 
 2   give Phil some comments that I had on the first section 
 3   of this provision, so -- thanks, Phil. 
 4                 MR. SANDERSON:  Phil Sanderson, Assistant 
 5   Director of the Charitable Bingo Operations Division.  I 
 6   just wanted to reiterate some comments that Billy had 
 7   made.  Primarily right now we're putting this out there 
 8   for informal comments.  It's just for discussion.  And 
 9   hopefully it will be on the web site so that everybody 
10   can get access to it that's not here, and if you are 
11   here, we have copies available for you.
12                 And it's -- it is a big deviation from, 
13   you know, history as far as, you know, enforcement goes, 
14   and it's something new, and we talked at our meeting in 
15   the work groups that in coming up with some of the 
16   information and the penalties, it's -- it's not the 
17   intent to put organizations out of the bingo business 
18   through administrative penalties.  The bingo division 
19   does not get to keep any administrative penalties.  They 
20   all go straight to the general revenue, so it's not an 
21   ulterior motive for us to get more funding for anything.  
22   But at the same time, we wanted to make sure that we set 
23   an amount that would help deter organizations from not 
24   being in compliance with the act. 
25                 With that I just -- you know, like I said, 
0070
 1   the primary purpose of today is to get the draft out 
 2   there for individuals to look at, make informal 
 3   comments.  You can e-mail those comments to myself or 
 4   Marshall.  And I concur with Steve that, you know, maybe 
 5   a couple of work group sessions we can sit down and help 
 6   iron out some of the concerns that you may have and your 
 7   people you represent may have. 
 8                 MR. ATKINS:  And I'd just follow up with a 
 9   comment that Phil made, which is also one that Marshall 
10   made, and it kind of ties into, Steve, your comment 
11   about the fact that you could have one worker with ten 
12   violations.  And, again, the purpose of this is to deter 
13   violations because as big a surprise as this is going to 
14   come to everybody, there are people that violate the act 
15   and don't care.  They just don't care.  And so, you 
16   know, we're looking for, you know, some way to make sure 
17   that they understand that we do care and that we'll take 
18   as appropriate the actions we can under the statute. 
19                 MR. WHITTINGTON:  Well, you know, I 
20   understand.  I saw this for the first time yesterday 
21   when I received this book.  Some things, yes.  I mean, 
22   people shouldn't do some of these things.  They 
23   shouldn't, and there should be -- should be a penalty 
24   for some of these things.  But being a hand chop 
25   (phonetic) to all these -- all these penalties here, 
0071
 1   it's really -- going to be really devastating to the 
 2   charities.  Just be thinking about it. 
 3                 MR. ATKINS:  Let me make one other point.  
 4   All of the violations that are in there are in either 
 5   statute or ruling, so it's -- you know, it's not that 
 6   this rule creates any violations that aren't already out 
 7   there.
 8                 MR. WHITTINGTON:  Well, I understand that.  
 9   As far as the penalty, as far as the money amount.
10                 MR. ATKINS:  Okay.
11                 MR. WHITTINGTON:  When you look at money, 
12   you look at all those violations, and that's the 
13   double-whammy on you right there right away because you 
14   say, "If I mess up any kind of way, I'm out of 
15   business," and that's how they're going to be looking at 
16   it.  And bingo's down anyway, so that's more stress on 
17   the charities just by trying to do things right, and I 
18   think all of them basically try to do things right.  And 
19   they're going to mess up because they're human, and some 
20   of these people that come around with the Texas Lottery 
21   Commission, they're pretty tough when it comes to 
22   enforcing violations.
23                 CHAIR TAYLOR:  As a member of the work 
24   group, I would like to say, Danny, that I think that 
25   Steve had a great idea.  I would like to see it go back 
0072
 1   to the table.  There's an awful lot of people here that 
 2   want to make comment, but maybe if they all know that we 
 3   would like to continue working on this, the comment 
 4   won't all need to be made today, and instead it's 
 5   comment that we could take into the next work group.
 6                 MR. MOORE:  Sure.  We only got our hands 
 7   on this two weeks ago, so I think it deserves a little 
 8   more digging before we move forward with it. 
 9                 CHAIR TAYLOR:  So if there's any other 
10   public comment that you feel that you need to make at 
11   this time -- there's an awful lot of people here.  If 
12   anybody would like to come forward that feels they need 
13   to talk to us or to express their feelings or opinions 
14   before the work group, come on up. 
15                 MR. FENOGLIO:  I hear the signal you're 
16   giving, Madam Chair, and thank you.  I see the hook 
17   coming across the stage, so I am sitting down.  Thank 
18   you. 
19                 MR. DOUGHERTY:  Madam Chairman, before we 
20   get into the public comment, which will take some time, 
21   I would like a little discussion on the standpoint of 
22   enforcement of certain items, not counting recordkeeping 
23   items.  Understand? 
24                 For instance, 1208.  How do you enforce 
25   the conducting bingo outside of the licensed time?  You 
0073
 1   know what I mean?  If it's supposed to end at 2:30, and 
 2   they go to quarter to 3:00.  Is that what's indicated?  
 3   How do you enforce that?  Number 1209, "The organization 
 4   sold pull-tab tickets at an unauthorized time."  I 
 5   presume before and after bingo.  Those are questions 
 6   that I have.  There are a number of those throughout 
 7   here that are ambiguous and have nothing to do with 
 8   recordkeeping, and that's the thing that bothered me.  
 9   How in the world do you enforce that sort of thing? 
10                 CHAIR TAYLOR:  You don't have any more 
11   concerns than I do.  I have yellow highlighter 
12   throughout the rules, so I am very concerned with this 
13   because I think that there are penalties in place for 
14   some of it, not filing your quarterly report on time, 
15   not paying your taxes on time.  There are penalties for 
16   some of these.  I don't think we need the additional 
17   penalties.  But just in order to save time, we don't 
18   like it.  We would like to go back to the table and work 
19   on it. 
20                 MR. DOUGHERTY:  Okay.  Those sort of 
21   things would be addressed?
22                 CHAIR TAYLOR:  I would hope so.
23                 MR. DOUGHERTY:  Who in the world is 
24   policing all this stuff?
25                 MR. ATKINS:  Let me clarify one thing.  
0074
 1   These aren't additional penalties.  These are just 
 2   telling you what the penalties are going to be. 
 3                 CHAIR TAYLOR:  Is there -- there's already 
 4   a penalty, though, for filing a late report.  Isn't 
 5   there five percent?  So it would be an additional 
 6   penalty on the late report; is that correct? 
 7                 MR. ATKINS:  Uh-huh.
 8                 CHAIR TAYLOR:  So I understand it's not a 
 9   new rule.
10                 MR. ATKINS:  It's not an additional 
11   penalty.
12                 CHAIR TAYLOR:  It would become the 
13   penalty.
14                 MR. ATKINS:  Yeah. 
15                 MR. McDADE:  I am going to correct that 
16   one.  Related to things that are already -- things that 
17   are already -- penalties that are already in statute 
18   related to the three-strikes rule, you haven't submitted 
19   your quarterly reports in three times within a year, 
20   that penalty is specifically stated in statute what it 
21   is.  Jeopardy, all those things are in statute, so we 
22   have not tried to address that particular violation in 
23   this penalty charge.  This covers everything else. 
24                 Where there are specific things in the 
25   statute, those are addressed in the statute.  But all 
0075
 1   the other things that are -- for instance, playing  
 2   outside of licensed time, there's not a specific penalty 
 3   amount dictated in the statute, so we've included that 
 4   in the chart and in these rules.  So I just wanted to 
 5   make sure that's clarified.
 6                 MS. ROGERS:  Madam Chair, I have one 
 7   question, one concern.  Maybe this will be handled when 
 8   y'all go to meeting.  But the papers that he gave us 
 9   here, even the lottery's papers, your first offense you 
10   get a warning.  And am I reading this correctly on all 
11   of these, they want to -- I was curious why there were 
12   going to be fees -- you know, penalties on first 
13   offenses.  Was there a reason for not giving warnings 
14   like -- 
15                 CHAIR TAYLOR:  I actually asked that, too, 
16   but what -- is the amount of the penalty -- Marshall 
17   brought my attention back at the committee meeting to 
18   the fact that it says that it's "determined by 
19   considering the following factors."  Marshall or 
20   somebody else at that meeting read me that again, that, 
21   you know, this is up to.  This doesn't mean it's 
22   automatically going to be $1,000 or $100.  That means 
23   that they have -- they can do that.  That's what they 
24   can do to you.  It's not necessarily what they will do.  
25   But, once again, it's all something -- we only met 
0076
 1   really one time about this, and it's something we didn't 
 2   feel comfortable with, but this is where we are at this 
 3   time.
 4                 MS. ROGERS:  It's something that y'all 
 5   will discuss, though --
 6                 CHAIR TAYLOR:  Yes.
 7                 MS. ROGERS:  -- when you have the 
 8   round-table meetings. 
 9                 MR. WHITTINGTON:  It shouldn't be a "can 
10   do" or "would do."
11                 MS. ROGERS:  I agree.  I think it should 
12   be -- it shouldn't be if they're having a good day that 
13   day or not, you know.
14                 MR. WHITTINGTON:  Right.  It's a good day, 
15   I feel good, so you're okay.  If I feel bad, no, you're 
16   not. 
17                 MS. ROGERS:  I agree.  I will volunteer to 
18   assist on this work group.
19                 MR. WHITTINGTON:  And, Jack, to answer 
20   your question, if a Lottery Commission person has been 
21   there --
22                 MR. DOUGHERTY:  I need an answer -- 
23   (inaudible).
24                 MR. WHITTINGTON:  -- they going to come 
25   down on you.  If they there and they see you played past 
0077
 1   your time or played the wrong pull-tabs at the wrong 
 2   session, if they're there, they will penalize you. 
 3                 MR. DOUGHERTY:  "They" being the 
 4   participants? 
 5                 MR. WHITTINGTON:  No, the staff, the 
 6   Lottery Commission if they're there. 
 7                 MR. DOUGHERTY:  Okay.  Okay.
 8                 MR. McDADE:  One of the things I want to 
 9   make clear is that the category headings --
10                 MS. ROGERS:  Yes.
11                 MR. McDADE:  -- provide the maximum 
12   penalty that could be applied.  In further documents we 
13   try to detail -- we know we can't apply the same penalty 
14   for fairness across -- to the same -- the same penalty 
15   to a Class A organization, the smallest organization, 
16   versus a Class J, which is the largest organization, 
17   because it wouldn't be fair.
18                 MS. ROGERS:  Right.
19                 MR. McDADE:  So some of the further 
20   documents talk about how to apply differing amounts of 
21   penalty to those organizations.  For simplicity's sake, 
22   we tried not to include too much in the penalty chart on 
23   the first 14 pages because it just got too confusing.
24                 MS. ROGERS:  I understand that, but I 
25   think it also needs to be understood, like Mr. Bresnen 
0078
 1   was saying, that people make mistakes every once in a 
 2   while.
 3                 MR. McDADE:  Definitely so.
 4                 MS. ROGERS:  And even if you look at these 
 5   violation codes here, you know, the lottery is giving 
 6   warnings on a first offense, and I don't see where we 
 7   should be any different.  But that will, once again, go 
 8   to the work group.
 9                 MR. ATKINS:  Let me try again.  Turn 
10   over to page 4, first violation, 1101.  "A person 
11   knowingly participates in the award of a prize to a 
12   bingo player ..."
13                 MS. ROGERS:  Yes.
14                 MR. ATKINS:  The maximum amount of the 
15   penalty could be $1,000.
16                 MS. ROGERS:  Yes.
17                 MR. ATKINS:  Or the penalty could be a 
18   warning letter.
19                 MS. ROGERS:  Okay. 
20                 MR. ATKINS:  Go over to page 2.
21                 MS. ROGERS:  I understand that part, but I 
22   mean -- okay.  Maybe that's more to be discussed during 
23   the work group.  But -- so you're going to leave it to 
24   the auditor to walk in and say, "Well, I feel this is 
25   what it's going to be"?
0079
 1                 MR. ATKINS:  No.  I think it's going to be 
 2   left up to the director.  What the director is going to 
 3   do, he's going to go down each of those items.  So let's 
 4   say it's a brand-new organization that's been licensed 
 5   one day, and they -- you know, they made a mistake.
 6                 MS. ROGERS:  Right, an honest mistake.
 7                 MR. ATKINS:  They admitted that they made 
 8   a mistake.  When the auditor came in, they were just all 
 9   over the auditor, giving them every shred of information 
10   they could, you know, showing what happened, how it 
11   happened, what they've done to make sure it never 
12   happens again, et cetera, et cetera.  Those are factors 
13   that will be taken under consideration, as opposed to an 
14   organization that's been conducting bingo for 20 years 
15   with the same operator, and when the auditor walks in, 
16   they won't even talk to him.
17                 MS. ROGERS:  Well, I agree.  I support 
18   that.  That's true.  Because there are some 
19   organizations that probably do try to detour and not pay 
20   what they should be paying.  But I would like to 
21   volunteer on record to help with this work group on 
22   these meetings, so --
23                 MR. ATKINS:  Great. 
24                 CHAIR TAYLOR:  So that's okay with you, 
25   Danny, since you're chairing it?
0080
 1                 MR. MOORE:  Sure.  We need a lot of help.
 2                 CHAIR TAYLOR:  Okay.  Public comment?  Any 
 3   public comment on this?
 4                 MR. HUTCHINS:  Good morning.  My name is 
 5   Chuck Hutchins from Dallas.  I'll keep mine short.  It 
 6   seems that we want to move on with this. 
 7                 Bingo has been around for over 
 8   20-something years.  We haven't had anything like this 
 9   that -- to cloud the issue, to penalize the charities.   
10   I don't know where the money will come from to pay 
11   these fines.  If it can't come from bingo, what are we 
12   gonna -- where are they going to pick up the money from?  
13   It doesn't get paid by the individual or -- you know, is 
14   the fine going to be assessed to the individual?  
15   Where's the money going to come from? 
16                 It won't be long until about -- I don't 
17   know.  The way violations go, everything in the world is 
18   a violation.  God, you can just have the least little 
19   thing.  Someone can come in, they can find five, six, 
20   seven, just minor stuff, minor things.  If that's the 
21   case, well, then the charities can't -- you know, you're 
22   going to have to revoke their license if they don't pay 
23   it.  It can't be bingo money, so how are they going to 
24   pay it?  Are they going to have the employee pay it?  
25   You know, there's lots of question there I did not 
0081
 1   understand, and I really don't understand why we need it 
 2   at all.  We've got along fine all these years without 
 3   it. 
 4                 The bingo division has done an adequate 
 5   job or some -- most cases a very good job of taking care 
 6   of the problems that come up in bingo, and they haven't 
 7   had this.  That's my comment.  Thank you very much.
 8                 MR. SMITH:  My name is Trace Smith.  Madam 
 9   Chair, Mr. Atkins.  I just want to say this will be very 
10   quick.  Most of the charities are trying to comply with 
11   everything.  They don't try to commit violations, and I 
12   don't think there's really a need for a severe deterrent 
13   for most of the charities.  I do realize that there are 
14   certain charities out there that -- like Mr. Atkins 
15   said, have a disregard for the law.  I do want to thank 
16   you for agreeing to do another workshop.  I think that's 
17   the right direction that we need to head in. 
18                 A couple of points real quick.  The 
19   four-year thing, rule says the charity will be fined for 
20   a repeat violation if it makes a mistake again within 
21   four years of the first one, I don't know of any charity 
22   or individual that can go four years without making more 
23   than one mistake.  That's a very important point.  
24   That's very important on our list. 
25                 Also, the rule requires that every 
0082
 1   settlement agreement contains findings of facts and 
 2   conclusions of law.  What if a charity would like to 
 3   settle, you know, but doesn't want to admit it violated 
 4   the law?  Maybe they just want to get it out of the way 
 5   and save the money and time and pay a small fine and go 
 6   on about their business.  I would like to maybe see if 
 7   we could leave an option there for ourselves and maybe a 
 8   little wiggle room for something like a no-contest 
 9   traffic ticket, something of that nature that, that, 
10   yes, we will pay the fine, but we don't think we were 
11   necessarily wrong in an unintentional clerical error of 
12   something, transposing numbers, something like that. 
13                 Like I say, I would like to thank you for 
14   agreeing to do the next workshop. 
15                 CHAIR TAYLOR:  Thank you.  
16                 MR. BRESNEN:  I'm Steve Bresnen with the 
17   Bingo Interest Group.  I'll defer my comments in 
18   participation to the workshop.  One of the things I 
19   would like for the working group to think about is how 
20   the offenses are classified, if we're going to use 
21   categories of classification.  I think, Billy,  the 
22   dialogue that you and Steve had about 1101 and 1102 is a 
23   good example of what I'm talking about.  1101 has a 
24   "knowingly" component to it, and that -- to me that 
25   connotes a dishonest or sort of a, you know, malevolent 
0083
 1   or component of evil of what somebody did, whereas the 
 2   other is a strict liability standard that just says it 
 3   was -- it was falsely stated.  A statement can be false 
 4   regardless of the pure heart of the individual who made 
 5   the statement. 
 6                 So I would like to see ultimately a 
 7   distinguishing between those things that have -- that 
 8   amount to dishonesty, of money being diverted to 
 9   somebody's pocket or something like that.  I really 
10   think that's the -- that's the kind of conduct that 
11   needs to be deterred far more than, say, a transposition 
12   of -- on a quarterly report or that sort of thing. 
13                 I would like to underline what Trace said.  
14   I think the way the rule is written right now that you 
15   would not be able to -- the agency would not be able to 
16   settle a case without findings of fact and conclusions 
17   of law.  Almost inevitably I don't think the agency is 
18   ever going to be willing just to sign onto a document 
19   where it says, you know, the facts are we found -- we 
20   found no violation, but everybody agreed we just accept 
21   the penalty.  You're not going to want to do that.  98 
22   percent of the civil litigation in the country is 
23   settled before trial, and it almost always has 
24   provisions in it that say, nobody is admitting that they 
25   did anything wrong, but in order to avoid the expense 
0084
 1   and use of resources and time of further litigation, 
 2   we're going to settle, and frequently one party pays the 
 3   other one some money in the course of doing that. 
 4                 I think the way the rule is right now, 
 5   even if the agency wanted to settle without findings of 
 6   fact and conclusions of law, they couldn't because the 
 7   rule would preclude you from doing it, so I would 
 8   strongly suggest that you leave that option open to 
 9   yourself.  I think you'll be able to settle more cases, 
10   and people will be willing to just take care of their 
11   business and get on down the road. 
12                 I'll be happy to answer any questions, or 
13   I'll be happy to shut up and get out of here.  Thank 
14   you.  Bye.
15                 CHAIR TAYLOR:  Is there any other public 
16   comment? 
17                 MR. HEINLEIN:  I've got 12 copies of -- 
18   I'm David Heinlein.  I keep records for over 30 
19   charities, going down steadily.  But Mr. Daugherty made 
20   a comment there that would be where I am.  I think that 
21   there has to be a distinction between these violations 
22   and recordkeeping violations because recordkeeping 
23   violations are going to be inherent to having errors in 
24   them, mathematical errors. 
25                 But in an effort to understand the 
0085
 1   possible impact of these administrative penalties, I've 
 2   offered the following scenario, and I've written it out 
 3   for you.  You know, there's two different charities that 
 4   play on two different occasions, but one charity doesn't 
 5   complete their daily cash report that evening, and it 
 6   gets late, and they're wanting to go home.  They grab a 
 7   deposit book, the wrong one, and they fill it out, and 
 8   they put that deposit slip in the money bag with the 
 9   money, hand it to the security guard, and he takes it to 
10   the bank. 
11                 Everything looks good.  They've taken 
12   their money.  The money is into the bank the next 
13   business day.  The problem is it's in the wrong account.  
14   And I had this happen to me just this last quarter where 
15   a charity had done this, and we did not catch the error 
16   until, of course, we got the bank statements and found 
17   out that the money was in the wrong account. 
18                 It also caused them difficulty because 
19   they thought they had money in their bank that they 
20   didn't have, and it caused an overdraft at their bank.  
21   So it's not a violation that they certainly intended to 
22   do.  They did not want to do it, but it was an error.  
23   It was unintentional. 
24                 But the way that I'm reading the rules 
25   that are being offered here, there's a possibility of 
0086
 1   three violations there.  One is that they failed to 
 2   deposit by the next business day.  That's Violation 
 3   1228, Category 2.  Then they failed to deposit all funds 
 4   derived from the conduct of bingo, No. 1317, Category 
 5   No. 3, and the second charity deposited unauthorized 
 6   funds to its account, Violation 1403, Category 4.  And 
 7   if you total up all these recommended penalties for 
 8   that, that's a total of $1,500.  And if you take that 
 9   into consideration that it occurred for 40 days, that's 
10   40 violations of each of those, and 40 times 1,500, this 
11   violation, one clerical mistake could cost $60,000. 
12                 So I'm listing that as a possible impact 
13   and something that needs to be considered as we go into 
14   these work groups.  I'm glad you're going in that 
15   direction to look at all these possibilities because I 
16   think the recordkeeping violations have to be cast in a 
17   very different light than these flagrant things that you 
18   talk about in many of these instances which are 
19   obvious -- like Billy said, they just don't even care.  
20   They don't want to follow the rules. 
21                 But where we're trying very hard to follow 
22   every rule, we still make some mistakes, and it seems 
23   like it's unreasonable to cause penalties to go in that
24   area.  And these penalties seem very exorbitant, 
25   although I know the -- the statute has always said that 
0087
 1   the penalty can be up to $1,000.  We had to file our 
 2   990's by last Monday, and if we had failed to do that, 
 3   the IRS could assess us $20 a day penalty if our gross 
 4   receipts are less than a million dollars, and they are.  
 5   They also have a cap on that that it cannot exceed -- it 
 6   used to be $5,000.  They just changed it, and now it 
 7   cannot exceed $10,000.  So there's some reasonableness 
 8   for the kinds of slights that you fail to just -- you've 
 9   been given a lot of time to do something, and you fail 
10   to do it, and you should have, and so there is some 
11   penalty that would be reasonable, $20 a day, but not 
12   $1,000 a day or $1,500 a day.  I mean, that would be in 
13   an area that's just unconscionable. 
14                 So I think it's very good that we're going 
15   to do a little more work on this and give consideration 
16   -- I would ask that there be consideration given to the 
17   kinds of violations, be they recordkeeping, clerical 
18   errors, and get down into the IRS-type penalty, $20 a 
19   day, or if there are these other kind because if you're 
20   going to keep these other kinds, then I'm going to, as 
21   an accountant, have to give serious consideration as to 
22   whether or not I want to stay in this industry unless I 
23   can get some errors and omissions insurance because I'm 
24   going to make mistakes.  And that's it. 
25                 CHAIR TAYLOR:  Thank you.  And here's the 
0088
 1   carrot.  As soon as we finish the public comment, we can 
 2   go to lunch.  We need to be back here by 1:00 o'clock 
 3   because Commissioner Cox is going to be here then.  We 
 4   would like to not keep him waiting.
 5                 MS. IVES:  Suzanne, don't put the pressure 
 6   on me.  Sharon Ives -- and it's I-v-e-s -- Fort Worth 
 7   Bookkeeping.  I would like to go on record stating that 
 8   I agree with Steve Bresnen, Fenoglio, Trace Smith, 
 9   Chuck Hutchins, and David Heinlein, and as well I will 
10   be submitting a written comment to the work group at a 
11   later date.  In lieu of all my public comment, I'll make 
12   it short. 
13                 Mainly I would like to see a provision 
14   stating that at the beginning of an audit, if you 
15   disclose -- and I mean "you" as the charity or 
16   designated agent, unit manager -- that if you disclose 
17   that you have discovered your own mistake or mistakes 
18   and bring that information forward to the auditor or 
19   auditors, that no penalties would be assessed.  And 
20   basically that's all I have for right now.  Like I said, 
21   I'll be submitting more written responses on this item. 
22                 CHAIR TAYLOR:  Thank you.
23                 MS. IVES:  Thank you.
24                 CHAIR TAYLOR:  We would like all written 
25   responses.  If you would like, you can send it to Danny 
0089
 1   Moore, myself, Kimberly, Marshall McDade, Stephen 
 2   Fenoglio.  Every little thought that you think we need 
 3   to know, let us know.  The more public input we have, 
 4   the better job we'll do at this next work group meeting. 
 5                 If there's no other public comment, then 
 6   let's break for lunch.  We need to be back here at 1:00 
 7   o'clock. 
 8                 (Lunch break taken.)
 9                 CHAIR TAYLOR:  Okay.  We do have a quorum 
10   again, so we're going to call the meeting back to order.  
11   It's 1:03.  We'll continue with Item No. 7 and give 
12   people an opportunity to get back from lunch, and then 
13   we are going to go to Item No. 12 again.  I would like 
14   to welcome Commissioner Cox to our meeting.  We 
15   appreciate the fact that he's come and is going to speak 
16   to us. 
17                 So Item No. 7, "Report and possible 
18   discussion by the Bingo Advisory Committee work group on 
19   the review of the Operator Training Program, including 
20   development of information to be provided by licensees."
21                 I'm chair of that committee.  Marshall so 
22   wonderfully has worked on developing this and will take 
23   it over at this time. 
24                 MR. McDADE:  Good afternoon.  Again, I'm 
25   Marshall McDade.  I'm the senior audit manager of the 
0090
 1   Charitable Bingo Operations Division.  The Operator 
 2   Training Program, there were a couple of initiatives 
 3   that we were going to try to work on during this 
 4   intervening interim period.  One was dealing with -- 
 5   working with the IRS to videotape their section of one 
 6   of our classes in San Antonio on October 19th, but 
 7   unfortunately due to a medical emergency, the IRS 
 8   representative was unable to be there, so we weren't 
 9   able to tape that presentation so we could make it 
10   available to all of our live training classes. 
11                 But we still are working with the IRS to 
12   develop some sort of -- develop their portion of the 
13   class so that we can make it available at all our 
14   training classes, either as a CD or as a DVD that we 
15   could just pop into the machine and have that section 
16   there.  We think it's a very important part of -- some 
17   very important information provided by the IRS related 
18   to unrelated business income taxes and other tax issues 
19   that charities need to be aware of, and that's one of 
20   the things that we always here when we go to our classes 
21   is we love -- we would like that information, and we 
22   want -- when it has been provided to us, we want to make 
23   sure it's available to all of our charities and all of 
24   our individuals when they attend these training classes, 
25   so we're still working with that.
0091
 1                 Related to the Operator Training Program 
 2   on video, we -- we kind of have resumed some work on 
 3   that development of that new video.  Staff has been 
 4   reassigned to work in writing scripts for that, so we've 
 5   gotten that process back rolling again.  At this time 
 6   there's no additional information. 
 7                 MR. ATKINS:  The only other thing I wanted 
 8   to point out, each of you had this at your location.  
 9   There was some discussion at the last advisory committee 
10   meeting about the division putting some information 
11   together for licensees to use that could be included in 
12   the Operator Training Program on dealing with media 
13   issuing press releases, et cetera.  So this is what the 
14   staff has developed, and we still need to run it through 
15   our legal division, but we're at a point where we're 
16   ready to receive comments to it, suggestions, et cetera.  
17   So if you would, take that, and if you have any 
18   suggestions for this information, you can e-mail Terry 
19   Shankle on our staff, and she will work on getting that 
20   incorporated. 
21                 CHAIR TAYLOR:  Larry, this looks like it 
22   should be answering some of the items that you asked 
23   for.  Not a lot; some. 
24                 MR. WHITTINGTON:  Uh-huh. 
25                 CHAIR TAYLOR:  Marshall, one of the things 
0092
 1   that I was worrying about with the IRS was the fact that 
 2   so many charities -- I suggested that -- it wasn't at 
 3   all the training sessions -- were that all the charities 
 4   weren't made aware of the fact that the instant bingo 
 5   does not qualify as bingo games and is unrelated 
 6   business income, so that's why I'm really glad to hear 
 7   that y'all are continuing this effort so that the 
 8   information gets out to all the charities. 
 9                 I think the new charities when they're 
10   first starting, too, need to be aware of that during 
11   their licensing.  When they go to do the licensing -- 
12   thank you -- pre-licensing interview because I was at 
13   one of those, and I don't recall them saying -- in fact, 
14   I was at a couple of them, and I don't recall anybody 
15   talking about that, and that's something that can really 
16   kick them without them knowing that it's coming.  And 
17   there's some other things, too. 
18                 Steve, this is the IRS and taxing 
19   pull-tabs.  Did you want to say anything about that? 
20                 MR. FENOGLIO:  For the record, my name is 
21   Stephen Fenoglio.  I appeared here before today -- or 
22   earlier today.  I had delivered a letter that I had 
23   drafted and sent to Suzanne Taylor and Billy Adkins 
24   asking for the next item -- or the next BAC meeting to 
25   have on its agenda an item that appeared or discussion 
0093
 1   of the item that appeared in the Bingo Bulletin having 
 2   to do with perhaps another example of the law of 
 3   unintended consequences in that whether the sale of 
 4   bingo product exposes a charity to a wagering tax or 
 5   other excise taxes assessed by the federal government in 
 6   the Internal Revenue Code, and I think it's a -- I've 
 7   started the research. 
 8                 Some of the information that was obtained 
 9   by the staff -- and I asked for a copy of whatever the 
10   staff could get under an Open Records Act.  I haven't 
11   received that information yet, but some of it seems 
12   inconsistent with the actual IRS statute and the rules 
13   that had been promulgated, so I think by the next BAC 
14   meeting we can have a better handle on it in that 
15   regard. 
16                 I heard someone mention UBIT, unrelated 
17   business income tax.  That's a separate issue, and I can 
18   talk on that issue if that's your choice about -- any 
19   discussions about what UBIT is and how it can affect 
20   charities. 
21                 CHAIR TAYLOR:  My question is, on the 
22   video that is being put together, is it going to cover 
23   both these taxes that charities can incur from the IRS?
24                 MR. McDADE:  As far as the IRS, we're 
25   going to allow the IRS to talk about the issues that 
0094
 1   impact charities, so if those are some of the issues 
 2   that impact charities, we would encourage them to 
 3   include that in the video that they're going to produce 
 4   for us and probe them to do that for us.
 5                 MR. FENOGLIO:  I think that would be very 
 6   helpful to have.  And I've attended two of the training 
 7   sessions.  I wasn't aware that IRS hadn't been -- 
 8   weren't at those two particular sessions that I 
 9   attended, but I think that's great if y'all can get a 
10   live IRS person to show up and provide some advice as to 
11   how the IRS views those issues. 
12                 CHAIR TAYLOR:  Thank you.  Is there any 
13   other comment?  Any questions? 
14                 MR. FENOGLIO:  Thank you.
15                 CHAIR TAYLOR:  Public comment?  If not, 
16   then we would like to go ahead and skip back over to 
17   Item No. 12, "Discussion of a joint meeting of the Texas 
18   Lottery Commission and Bingo Advisory Committee," and 
19   once again, I would like to welcome Commissioner Cox.  
20   We appreciate your coming, and we wait to hear your 
21   words of wisdom. 
22                 COMMISSIONER COX:  You may have a real 
23   long wait.  I'll do the best I can. 
24                 For the record, I'm Jim Cox.  I'm a member 
25   of the Texas Lottery Commission.  Andy, is there 
0095
 1   anything you want to say before I launch into this about 
 2   what I can and cannot do?
 3                 MR. MARKER:  No, sir.  I believe you have 
 4   pretty much free reign.  I'll chime in if there are any 
 5   concerns.  
 6                 COMMISSIONER COX:  Unfortunately Chairman 
 7   Clowe and I can't -- we both have a high level of 
 8   interest in bingo, and we can't both be here at the same 
 9   time, and so that probably is going to mean that instead 
10   of y'all getting asked a set of questions and getting to 
11   answer them once, that you're probably going to get two 
12   sets of fairly similar questions and get to answer them 
13   twice.  I hope that's okay with y'all because we are 
14   very anxious to get your input on some matters. 
15                 In the open meeting yesterday, Chairman 
16   Clowe outlined the questions that he believed that we 
17   should discuss, so what I talk to you about should be 
18   quite similar to what Chairman Clowe said because we did 
19   talk yesterday at the open meeting about the kinds of 
20   things that we were interested in getting feedback on.  
21                 I am going to tell you the questions that 
22   I am interested in, and we'll go through them however 
23   y'all would like to really.  I want to get y'all's 
24   feeling about what kind of progress you're making as an 
25   advisory committee.  I want to give you some thoughts on 
0096
 1   how it looks from my standpoint.  I want to see if you 
 2   agree with the thoughts that I have. 
 3                 I want to talk a little bit about a 
 4   possible joint meeting of the Bingo Advisory Committee 
 5   with the Texas Lottery Commission, and then I want to 
 6   talk about all of these things in the context of the 
 7   less than one year that is remaining on the charter of 
 8   the Bingo Advisory Committee. 
 9                 As you know,  the continuation of the 
10   committee is at the pleasure of the Texas Lottery 
11   Commission, and during this year we extended its term, 
12   its tenure through 8-31 of '05, so that is a date by 
13   which we want to have our view -- and hopefully it will 
14   be the same view you have -- that this committee is a 
15   good thing, it's productive, and it's helpful, or there 
16   might be better ways to spend your time and ours as 
17   well. 
18                 So that's what I think we're all 
19   interested in doing is helping the committee be as 
20   productive as possible and then reaching a joint 
21   conclusion on, is this the best way that we can spend 
22   these resources, or is there a better way for both the 
23   industry and the Commission to go about things?  
24                 So, Suzanne, that's what I would like to 
25   talk about.  How would you like to proceed? 
0097
 1                 CHAIR TAYLOR:  I think first we -- I'd 
 2   like to hear what you think about the BAC's progress.  
 3   What did -- I mean, is there something we can ask you in 
 4   reverse and then give you feedback on how we feel? 
 5                 COMMISSIONER COX:  That's one of the 
 6   things that Chairman Clowe and I agreed yesterday that 
 7   we wanted to do was to tell you how we saw it.  And I 
 8   don't know what he said, and we may see this thing 
 9   entirely differently.  And he comes from a lot further 
10   back than I do because I've only been on this board a 
11   couple of years, and Tom's been on the board nearly six 
12   years, and he's been coming to BAC meetings for all of 
13   that time, Billy? 
14                 MR. ATKINS:  Pretty much.
15                 COMMISSIONER COX:  So he knows a lot more 
16   about y'all's history and your industry than I do, and I 
17   bring more a high level of interest and maybe some fresh 
18   ideas good for you, but Tom's the one with the tenure.
19                 What I see in the -- let's call it two 
20   years that I've been coming to these committees is 
21   significant improvement.  I see a better organized 
22   meeting.  I see an agenda that makes more sense to me 
23   than I initially saw.  I see some new faces and some 
24   enthusiasm that I didn't see before, and I see some of 
25   the same faces, which indicates dedication, and so I 
0098
 1   think all of these things are very positive.
 2                 When I first came, it seemed that the 
 3   agenda was always the same, and it was, What can the 
 4   Lottery Commission do for us in the way of advertising, 
 5   new games, et cetera?  It seemed like that most of the 
 6   efforts were directed toward lobbying the Lottery 
 7   Commission to do things principally that we were 
 8   prohibited by statute from doing.  And I would say to 
 9   Billy, "Billy, haven't you told them that we don't have 
10   any advertising money to advertise bingo?  There's no 
11   money from the legislature for us to do that," and Billy 
12   would say, "Yes, I've told them, and yet they keep 
13   asking that same question."  Well, I'm not hearing that 
14   question anymore.  Y'all have recognized that we have 
15   limitations on what we can do, and I think you have a 
16   much more realistic agenda working within the art of the 
17   possible as to what the Texas Lottery Act and the Bingo 
18   Enabling legislation will permit the Texas Lottery 
19   Commission to do.  So I see that as very positive. 
20                 I saw initially a -- what I considered to 
21   be much too adversarial a relationship between the bingo 
22   staff -- between Billy and his staff and between this 
23   committee.  I see much less of that now.  I mean, I 
24   still see some frustration on both sides from time to 
25   time, and I think that's natural because Billy probably 
0099
 1   wants y'all to give things you can't give, and y'all 
 2   probably want Billy to give things he can't give.  And 
 3   as long as those things are out there, there will be 
 4   some tension, and I think that's healthy.  But I don't 
 5   see the open adversarial, disgusted kind of looks that I 
 6   saw two years ago when I first started coming to these 
 7   things.
 8                 I see an agenda that I think is a more 
 9   sound agenda, and I see it better adhered to, and I see 
10   helpful feedback coming to the bingo staff from you on 
11   the proposed rules and actions that Billy and his folks 
12   are taking.  So everything I see is positive. 
13                 The one thing that I think we all need to 
14   focus on, though, as we go forward is, are y'all and we 
15   best served with this kind of an advisory committee 
16   where you are subject to the open meetings law and where 
17   you have to work within the constraints that we the 
18   Lottery Commission sets, or are you better off taking 
19   the resources that each of you devote to this meeting 
20   and directing those toward a trade association where you 
21   wouldn't have those constraints?  I'm not suggesting 
22   that, but I think that is an alternative. 
23                 One of the frustrations that I have had -- 
24   and this has been mitigated significantly recently -- is 
25   that it seemed a couple of years ago like y'all were 
0100
 1   trying to act like a trade association disguised as a 
 2   bingo advisory committee.  I don't see that kind of 
 3   thing anymore, but I still -- I know that many 
 4   industries have industry trade associations that are 
 5   very beneficial to them, so I think it would be worth 
 6   your time considering whether instead of or in addition 
 7   to the efforts you put in here, that that might be 
 8   something that would serve you well.
 9                 So that's how it looks to me.  I would 
10   like to know, do y'all agree that I'm looking at it 
11   pretty realistically, and then I would like to know how 
12   y'all see it. 
13                 MR. MOORE:  I'll start.  I think we need 
14   both.  I think we need the BAC.  The rule-making goes on 
15   up here.  I think we have the ability to bring the input 
16   from the industry to the staff.  I think it's been 
17   beneficial in a lot of instances.  And as far as a trade 
18   association, we do have associations outside of this 
19   room between vendors, distributors, charities, and we 
20   are making efforts legislatively, if that's what you're 
21   talking about.
22                 COMMISSIONER COX:  That is.  Obviously 
23   here you can't take -- can't do any kind of lobbying 
24   activity, and some of the things that I saw early on and 
25   I don't see as much of now are clearly expressions of a 
0101
 1   need for changes in law, which this committee and the 
 2   Lottery Commission itself are unable to work on. 
 3                 MR. MOORE:  And I believe the act is the 
 4   root of the problem, not all of it obviously, but 
 5   they're -- it's antiquated.  The competition is out 
 6   there now, and if we can't talk about those things 
 7   here -- you know, I don't quite understand.  I mean, for 
 8   instance, if we talk about changing -- you know, nobody 
 9   wants to talk about advertising, but that means changing 
10   the act to get that.  Correct or incorrect?  Isn't it?
11                 COMMISSIONER COX:  We do not have any 
12   appropriated money to spend on advertising, Dan.
13                 MR. MOORE:  But, I mean, I don't want to 
14   go there.  I know that answer already, so -- but I just 
15   think that the act is the problem.  You know, it says 
16   it's a bingo enabling act.  I don't think it enables 
17   bingo anymore in this state.  I don't.  There's a lot of 
18   problems from the payout structure.  I mean, they still 
19   pay $500 a game.  $500 isn't worth what it was 20 years 
20   ago, plain and simple.  You know, and Commissioner Clowe 
21   sat here, and he said the same thing, and yet we're 
22   always prohibited from going in certain directions, I 
23   think, so --
24                 COMMISSIONER COX:  We don't want to stand 
25   in your way of doing it.  We just want to be sure that 
0102
 1   we recognize that this is not a place for -- that can go 
 2   forward.  Where we have to stand, I bet there are a lot 
 3   of things that if Billy were a private citizen all of a 
 4   sudden, that he might tell the legislature about the 
 5   act.  But we're kind of in a position now where they 
 6   kind of have to ask us the question. 
 7                 We at the same time want to be in a 
 8   position where we can give them a good answer if they 
 9   ask the question, which means that Billy and his staff 
10   and we as the board want to know about these things.  We 
11   just want it recognized that we can't lobby and that 
12   this forum is not a place for developing a lobbying 
13   agenda as well. 
14                 MR. MOORE:  Sure.  But we can as 
15   individuals outside of here.
16                 COMMISSIONER COX:  Absolutely. 
17                 CHAIR TAYLOR:  I have got to agree with 
18   Danny in a lot of that, and you said something that 
19   Commissioner Clowe this morning also said, is that if 
20   they come to you as a resource, the legislators, the 
21   reason that some of the items are brought up again and 
22   again is to make sure that as a resource you say, "Yes, 
23   they need advertising.  They need new technology.  They 
24   need this to be able to compete and to -- for the 
25   charities to be able to stay in business."  And we 
0103
 1   realize that you don't have the authority.  You can't do 
 2   anything about it, but you can be a mouthpiece if you're 
 3   asked, and that's why -- I know it's frustrating for all 
 4   of you, but it's -- we feel that if we stop talking 
 5   about it, that perhaps you'll think it's not as 
 6   important to us as it is.
 7                 COMMISSIONER COX:  Okay.
 8                 CHAIR TAYLOR:  And I think that's why it's 
 9   hammered to you because it's so important to all of us.
10                 COMMISSIONER COX:  Sure.
11                 CHAIR TAYLOR:  I agree that -- I have to 
12   agree with you.  It's not as adversarial.  A couple of 
13   years ago it was -- it was pretty stressful to come to 
14   the BAC meetings, but -- and I do think we work a lot 
15   better with the staff now, and I think having the work 
16   groups has been a huge help with that so that it's not 
17   us working against them all the time; it's a few of us 
18   working with a few of the staff.  And I truly think that 
19   helps both them and us so that we, you know, understand 
20   each other a little bit better than we did before 
21   because we're not up here and they're out there, so -- 
22   and I appreciate your comments.  I feel that we are 
23   working better, and we are more organized, and hopefully 
24   we can be some help with the rules and let them know 
25   what we think the implications will be in the halls for 
0104
 1   some of the rules, which is, I think, why we're supposed 
 2   to be here, to be an input back into the bingo world. 
 3                 MR. WHITTINGTON:  What I want to say, 
 4   Commissioner Cox, I appreciate you as well as 
 5   Commissioner Clowe being involved, more involved with 
 6   bingo because we definitely need that because that gives 
 7   us strong support on the Commission side to know what 
 8   bingo is all about or what's happening with the Bingo 
 9   Advisory Committee.  And I wanted to say I look 
10   around -- excuse me.  I look around at all these people 
11   as well as the Bingo Advisory Committee.  These people 
12   are here on volunteer time, and they are for real.  I 
13   mean, I wouldn't be here, okay, if I wasn't for real 
14   about bingo -- bingo issues, okay? 
15                 I know the Sunset committee has said 
16   certain things about the Bingo Advisory Committee, 
17   stopping it in a year or so.  These people are here on a 
18   volunteer basis to help out, to make bingo better.  
19   Okay.  That's why we're here.  And it makes -- to me it 
20   sounds like, "Okay, we're paying these people all this 
21   money, so we're going to cut this job out."  They're not 
22   paying a dime.  We're here to support bingo and help the 
23   staff to make bingo better.  That's why we're here.
24                 COMMISSIONER COX:  And as you know, 
25   Chairman Clowe and I are here on a volunteer basis as 
0105
 1   well. 
 2                 MR. WHITTINGTON:  Yes.
 3                 COMMISSIONER COX:  We're dedicated to 
 4   helping in whatever way we can.
 5                 MR. WHITTINGTON:  And I really appreciate 
 6   you, and things have changed in two years, thanks to you 
 7   and Commissioner Clowe.
 8                 COMMISSIONER COX:  Well, there's been a 
 9   lot of change here, too, and I think that the 
10   improvement is remarkable that we've seen in the last 
11   two years.
12                 MS. ROGERS:  I'll just take the time to 
13   say I think the BAC is very important.  I think all the 
14   people sitting out there are very important.  And what 
15   we -- as I see it, what we do is we bring the real bingo 
16   world here to you.  You know, in order for us to move 
17   forward, you need people like us to tell you about how 
18   it's working out there, and I would like to say I agree 
19   with everything everyone has said.
20                 I think it's very important that we would 
21   be able to meet with y'all and have, I think, as 
22   Commission Clowe said, a state-of-industry meeting.  I 
23   don't know technically know -- don't want to go there -- 
24   how it's -- how it's to come about or what it's to be 
25   called, but so we can communicate with all of the 
0106
 1   commissioners, you know, as all of you as a whole so we 
 2   can figure out how we can move forward and make bingo 
 3   better.  So --
 4                 COMMISSIONER COX:  Did you want to say 
 5   anything, Mario?
 6                 MR. MANIO:  This is my third year with the 
 7   Bingo Advisory Committee, and I would like to say that 
 8   when I started serving in this forum, I am guilty of 
 9   being one of those with a combative attitude because my 
10   idea of the BAC was something that we can tell the 
11   Commission -- the Lottery Commission to do something for 
12   the bingo industry.  Later on it was crystallized in my 
13   mind that's not the function of the advisory committee.  
14   The function is to assist the regulator in forming the 
15   rules and to be sure that the point of view of the 
16   entities being regulated are recognized by the Lottery 
17   Commission. 
18                 Work group, I think that's a wonderful 
19   idea because now we have a vehicle by which the members 
20   of the Commission and the staff can work in a 
21   cooperative manner coming up with rules of the right -- 
22   or at least in our opinion and your opinion -- right for 
23   the charitable organizations, for the lessors, for the 
24   manufacturers. 
25                 My term is expiring in February next year, 
0107
 1   so I'm just speaking as a lame duck member of the 
 2   committee, but I'm involved right now in several work 
 3   groups, and I will try to finish the job that we have on 
 4   hand and, if necessary, go beyond my -- any expire of 
 5   mine -- my tenure to be able to conclude the work that 
 6   is -- that we have started. 
 7                 COMMISSIONER COX:  And, Jack, you're a 
 8   real volunteer.  You have no interest in bingo other 
 9   than just serving the industry and as a private citizen.  
10   This is your second meeting, I think. 
11                 MR. DOUGHERTY:  Well, Commissioner, I've 
12   been here about a year so fourth or fifth meeting, but, 
13   of course, I agree with all of what my compadres have 
14   said.  I can only emphasize the need to work -- whoever 
15   has to work with the legislature, which is not us, 
16   but -- but we can get the word out that the legislature 
17   needs to do something to increase limits and the 
18   advantages of playing bingo.  I can give a lot of 
19   examples, but I'm not going to do that.  And so that's 
20   sort of my focus, and, of course, I'm more or less of an 
21   observer than I am a policymaker.  But I would love to 
22   see whatever lobbying individuals can be mustered to 
23   work with that legislature to get them to raise certain 
24   limits. 
25                 I've already had a certain hand in a 
0108
 1   survey, which served a purpose, so now we know what a 
 2   bingo player looks like and acts like.  Having said 
 3   that, we need to work on that individual, that type of 
 4   individual.  It's usually the elderly people.  But 
 5   getting the monetary limits up and getting the 
 6   excitement of larger rewards I think is going to be a 
 7   big feather in bingo's hat.  And how that's going to 
 8   happen I don't really have the expertise to say, but I'm 
 9   hoping that through this bunch and the legislature and 
10   the Commission, we can do something along those lines 
11   hopefully in the near future.  So I certainly appreciate 
12   being a member of this group and wouldn't want it to 
13   end.
14                 COMMISSIONER COX:  Suzanne, what -- let's 
15   talk about the meeting.  Kimberly said that she thought 
16   it would be a good idea that we have a joint meeting.  
17   It was Chairman Clowe's idea, and I haven't heard him 
18   indicate any regrets about having floated it as an idea.  
19   What kinds of specific things would y'all see a meeting 
20   like that accomplishing or trying to accomplish? 
21                 CHAIR TAYLOR:  Do you want to start, 
22   Danny? 
23                 MR. MOORE:  No.  Go ahead. 
24                 CHAIR TAYLOR:  Danny asked earlier what 
25   kind of an agenda we would have prepared at that 
0109
 1   meeting.  I think, if nothing else, it would give us an 
 2   opportunity to talk back and forth some of the things 
 3   that you expect of us, some of the things that we would 
 4   like to see happen, also.  I think we're working better, 
 5   but I personally had told Billy I thought a joint 
 6   meeting would just be nice because we've done it one 
 7   time before in the past, and I can't remember when.  
 8   It's been way too many -- way too long, but I think it 
 9   would be a good opportunity for us to see you work 
10   together and y'all to see us work together, you know,  
11   as the group and especially if we were able to have a 
12   public comment, and we could have, you know, a good 
13   group meeting. 
14                 I think with a broad agenda -- nothing, of 
15   course, that's not in the Bingo Enabling Act or 
16   administrative rules but an agenda where people can come 
17   and tell you what -- what's happening, how are the rules 
18   affecting them.  Some rules that don't seem like they 
19   should affect you at all are affecting, and there's 
20   things that we don't necessarily talk about at this 
21   meeting.  What is the new bond doing to the charities?  
22   How hard is it for a charity to get into bingo nowadays?  
23   It's hard.  It's hard.  The bonds are very hard for many 
24   charities, fledgling charities that are -- poor 
25   charities which are the ones that need bingo, those kind 
0110
 1   of items, you know, if we could have a broader 
 2   discussion of those types of topics.  So --
 3                 CHAIR TAYLOR:  Andy, do you see that those 
 4   kinds of issues would appropriately be on an agenda for 
 5   meeting that day?
 6                 MR. MARKER:  I think it depends on if that 
 7   meeting would be combined with a traditional meeting of 
 8   the Lottery. 
 9                 COMMISSIONER COX:  Do you want to come up 
10   here with me, Andy?
11                 MR. ATKINS:  And would you identify 
12   yourself, Andy?
13                 MR. MARKER:  Good afternoon.  My name is 
14   Andy Marker.  I'm assistant general counsel of the 
15   Lottery Commission. 
16                 I think you would have to look at the 
17   proposed agenda.  Again, I think it would have to be 
18   within the statutory authority of the Commission and, 
19   again, keeping in mind that the commissioners cannot ask 
20   the Commission itself -- cannot take a lobbying role.  
21   But in terms of a healthy discussion similar to what 
22   you're having this afternoon, I think it's within the 
23   Commission's discretion, and certainly I think in 
24   coordination with the Bingo Advisory Committee and with 
25   Billy and his staff and the commissioners, I think you 
0111
 1   could certainly formulate an agenda to exchange ideas 
 2   provided that you have a clear understanding of where 
 3   you hope to get.  In terms of an action item from the 
 4   commissioners approving an agenda for the Bingo Advisory 
 5   Committee, that may be beyond the scope of the 
 6   commissioners' discretion.
 7                 COMMISSIONER COX:  Billy, you've probably 
 8   been thinking about this longer than anyone else.  You 
 9   were there when Chairman Clowe indicated he thought this 
10   might be a good idea.  What do you see a meeting like 
11   this having as an agenda?
12                 MR. ATKINS:  I think, Commissioner Cox, a 
13   meeting like this would help address an issue that I 
14   raised this morning when the chairman was here, and that 
15   is serving as some sort of process for the Commission to 
16   clearly communicate its expectations to the BAC in terms 
17   of what it is you as a body are looking for from them. 
18                 They do have the benefit of hearing 
19   especially from you and Commissioner Clowe individually, 
20   but I think that kind of free-flowing communication will 
21   give them the opportunity to better understand what it 
22   is you want them to do as well as what it is you don't 
23   want them to do.  Because the issue that I raised with 
24   Commissioner Clowe this morning is I don't know if 
25   that -- I don't believe that question has been answered 
0112
 1   yet, and I think that a joint meeting would serve as a 
 2   venue where that could be better clarified. 
 3                 COMMISSIONER COX:  So while this committee 
 4   has a charter, you don't think that we have effectively 
 5   communicated our expectations to the committee. 
 6                 MR. ATKINS:  No, sir.
 7                 COMMISSIONER COX:  Okay.  I think that's 
 8   a -- I think that's a good point.  You know, I'm trying 
 9   to recall sometime when I sat down with anyone or even 
10   sat down by myself and wrote down on a piece of paper 
11   what I expected from this committee, and I think that 
12   probably I'm guilty of letting the committee develop for 
13   itself what my expectations might have been. 
14                 MR. ATKINS:  Well, and one thing the 
15   committee did do -- and I think that this was probably 
16   at your suggestion as much as anything -- was the 
17   development of a work plan.  That work plan hasn't been 
18   revisited in a while.  It's probably coming up on a 
19   year.  And that's probably something that this joint 
20   meeting could address in terms of progress of the 
21   Advisory Committee is looking at that work plan and what 
22   has been accomplished and what hasn't been accomplished. 
23                 But I don't -- I think it's a very hard -- 
24   particularly in the situation we're facing now where we 
25   have a couple of seats coming open and new people will 
0113
 1   be coming on the advisory committee, letting them know 
 2   this is, you know, what you're going to be doing.  This 
 3   is what the Commission seeks from you because another 
 4   discussion we had this morning was the fact that the 
 5   Advisory Committee isn't the staff's advisory committee.  
 6   They advise the Commission. 
 7                 Now, the staff, of course, works with them 
 8   in terms of rules that we're going to bring forward to 
 9   the Commission for consideration, but at the end of the 
10   day, ultimately under statute they advise the 
11   Commission. 
12                 COMMISSIONER COX:  Excuse me, Suzanne.  We 
13   were talking about what we might put on the agenda, and 
14   I did want to get Andy's thoughts in there, and so let 
15   me give it back to you, and maybe y'all can kind of -- 
16   and I think in general terms it's appropriate -- what 
17   you would like to accomplish at that meeting. 
18                 CHAIR TAYLOR:  Any thoughts? 
19                 MR. WHITTINGTON:  Commissioner Cox, I 
20   think the main thing is that we can just understand each 
21   other and what you want and what you expect from us, and 
22   we can basically cover certain things that y'all might 
23   can, you know, help us understand the meaning of what we 
24   can do and what we can't do to a certain point.  Because 
25   there's a lot of issues that are going to be always be 
0114
 1   thrown out there when it comes to bingo because I know 
 2   what bingo really needs.  It might not be on your agenda 
 3   or within your power to do it, but maybe it can be 
 4   filtered down to somebody that could basically educate 
 5   some of the people that can help us accomplish some of 
 6   our goals. 
 7                 COMMISSIONER COX:  Billy, you would 
 8   probably be the appropriate person to lead or run the 
 9   clearinghouse as far as what would show up on this 
10   agenda.  How would you suggest we go about putting this 
11   agenda together?
12                 MR. ATKINS:  I would propose that in 
13   between the chair of the Commission and the chair of the 
14   Advisory Committee, I'd work with the agency's general 
15   counsel on the development and drafting of the agenda.  
16   Similar to what, I believe, is done individually for 
17   each body, it would just be done jointly. 
18                 COMMISSIONER COX:  Andy?
19                 MR. MARKER:  I believe that is correct.  
20   You can certainly work on draft agendas, and then it 
21   would be reviewed by general counsel in terms of posting 
22   requirements and the scope and breadth of any particular 
23   agenda items.  But I believe in terms of exchanging the 
24   drafts, that would be certainly for the working group of 
25   the Bingo Advisory Committee and perhaps the 
0115
 1   commissioners and Billy to kind of initiate that draft 
 2   and then seek guidance with general counsel. 
 3                 COMMISSIONER COX:  I would say let's go 
 4   forward with that, and if we can develop an agenda that 
 5   we all think is worthwhile, then I'm 100 percent behind 
 6   this.
 7                 CHAIR TAYLOR:  Once again, I sure 
 8   appreciate you coming.
 9                 COMMISSIONER COX:  Well, thank you.
10                 CHAIR TAYLOR:  It's really great to see 
11   you-all.  I mean, years ago we never saw any of the 
12   commissioners unless we went to a commission meeting, 
13   and it is -- it is -- lets us know that you are 
14   interested in bingo, and we feel that we have like bingo 
15   buddies almost.  We have people that support bingo.  
16   It's not commissioners sitting up there that don't care 
17   about bingo.  We do feel that you care for bingo and 
18   that you're trying to help us, and we sure appreciate  
19   it.
20                 COMMISSIONER COX:  I'm glad y'all 
21   recognize that.  Chairman Clowe set a wonderful example, 
22   I believe, in the active role that he took, and that has 
23   certainly encouraged me to participate when he couldn't 
24   or even to share participation with him like we were 
25   able to do today with the tag team talking to you. 
0116
 1                 MR. ATKINS:  Commissioner Cox, could I 
 2   suggest -- Commissioner Clowe this morning talked about 
 3   a lot of his experience both -- on both -- what he 
 4   refers to as being on both sides of the table in the 
 5   industry, being regulated as well as being a regulator.  
 6   And I don't know if all of the advisory committee 
 7   members are aware of the particular background that you 
 8   have that is -- so I --
 9                 COMMISSIONER COX:  Well, I have been on 
10   all sides of this game.  I started in regulated 
11   industries in 1970 when I moved to Las Vegas.  At that 
12   time I was a member of the staff of a firm called 
13   Haskins & Sells, which is now Deloitte, one of the Big 
14   Four accounting firms. 
15                 THE REPORTER:  I'm sorry.  Sir, can you 
16   use your mic?  I'm having a hard time hearing you.  
17   Sorry. 
18                 COMMISSIONER COX:  And at that time our 
19   principal client in Las Vegas was Howard Hughes who had 
20   bought seven casinos, and that is one of the most 
21   heavily regulated industries in the world and 
22   appropriately so.  And as a CPA doing the audits of the 
23   casinos, I was a part of the regulatory process.  While 
24   the client paid us, our product, the opinion on those 
25   financial statements and on the compliance with the 
0117
 1   gaming regulations were furnished to the Nevada Gaming 
 2   Commission and the state gaming control board. 
 3                 I worked while I was in the accounting 
 4   profession on a committee of the American Institute of 
 5   CPA's that developed an audit guide for casinos.  Before 
 6   about 1970 casinos were not owned by companies; they 
 7   were owned by folks.  And when the big companies like 
 8   Hughes and Hilton and Corian and Del Webb began getting 
 9   into that, then the big firms began doing the audits, 
10   and they wanted a set of rules, so I was on the 
11   committee that was responsible for making the first set 
12   of rules for the AICPA for CPA's to audit casinos.
13                 In 1979 I went to work for the Hughes 
14   estate and spent ten years managing those casinos and 
15   ultimately selling them.  So I held a gaming license, 
16   and I was subject to the jurisdiction of the Nevada 
17   gaming authorities and developed a great deal of respect 
18   for the regulatory process and developed something that 
19   I hope all of you have, and that is a recognition that 
20   the most important asset you have as operators of 
21   gambling institutions is an effective regulatory agency.  
22   Because what we knew is that if our regulatory agency 
23   wasn't regarded as being effective, then our product, 
24   which was backed solely by our money and integrity, was 
25   worth nothing.  And if our agency were corrupt or even 
0118
 1   just inefficient and ineffective, then it would cast bad 
 2   light on the industry itself. 
 3                 So I have a very strong feeling that a 
 4   powerful and effective regulatory agency is the greatest 
 5   asset a gambling enterprise can have.  And when I came 
 6   on this board, I told whoever would listen that that 
 7   would be my goal, that this would be an effective 
 8   regulatory agency, and to the extent that anyone asked 
 9   me, I would ask for the statutory authority to be an 
10   effective regulatory agency. 
11                 Billy, thank you for that opportunity.  
12   That's -- I have been around regulated industries other 
13   than gambling, but it is my principal experience in 
14   regulated industries, and I have some deeply felt views 
15   about the importance of good regulation. 
16                 MR. ATKINS:  Well, and I just -- I offered 
17   that because Commissioner Cox does bring a wealth of 
18   information that I don't think this agency was ever 
19   privy to before his serving on the Commission.  And a 
20   lot of times we can talk about a situation, and he's in 
21   a situation not necessarily where he remembers it but 
22   maybe where he was directly involved in it, so it has 
23   been very beneficial for the staff to be able to call on 
24   that expertise. 
25                 COMMISSIONER COX:  Anything else, Suzanne?
0119
 1                 CHAIR TAYLOR:  I don't think so.  Thanks 
 2   again.
 3                 COMMISSIONER COX:  Thank you very much. 
 4                 CHAIR TAYLOR:  Public comment?
 5                 MR. CORNWELL:  I thought you were going to 
 6   tell us what you saw in the future in one of your notes, 
 7   what you saw that the industry needed to do. 
 8                 COMMISSIONER COX:  Well -- and let me 
 9   address that specific -- is it appropriate for me to 
10   answer that question, Andy? 
11                 MR. MARKER:  I believe so, as long as you 
12   stay within the scope and tie it back to a possible 
13   agenda item for a future meeting -- a joint meeting of 
14   the Commission and the Bingo Advisory Committee.
15                 MR. ATKINS:  Before you do that, Knowles, 
16   would you identify yourself?
17                 MR. CORNWELL:  I'm sorry.  I'm Knowles 
18   Cornwell with Good Time Bingo. 
19                 COMMISSIONER COX:  One of the things that 
20   we talked about yesterday in the Lottery Commission 
21   meeting was how important the charities are in bingo and 
22   how sometimes the focus is not necessarily on the money 
23   raised for charity but on the money -- the tax money 
24   that's raised.  And Chairman Clowe indicated that he 
25   thinks that to the extent that the focus can be on the 
0120
 1   importance of raising money for charity, that that's 
 2   where it should be directed, and that should be the 
 3   rallying point for the industry. 
 4                 And I've been trying to think of ways 
 5   that that might be done, and I think Stephen Fenoglio 
 6   was here yesterday when the chairman mentioned that, and 
 7   I'm sure Stephen has already thought about that and has 
 8   thought about it more since the chairman talked about it 
 9   yesterday.  But to me I think that the future may be in 
10   making the beneficiary better known to people. 
11                 You know, one of the things we know in the 
12   lottery business is that the most effective state 
13   lotteries are those that can identify their product with 
14   the beneficiaries of that product.  Now, I can't tell 
15   you that I know what is the best state lottery, but I 
16   can tell you what is one that does extremely well with 
17   that, and that is the Georgia lottery. 
18                 In Georgia the money from the lottery goes 
19   to provide college scholarships for any citizen of 
20   Georgia who can maintain a B average or better.  So when 
21   somebody buys a lottery ticket, they know that that 
22   money is going to provide education for citizens of 
23   Georgia.  Now, what does that do?  Well, first of all, 
24   it gives people a good solid feeling about where that 
25   money that they are spending for their entertainment is 
0121
 1   going.  What else does it do?  It develops a very strong 
 2   body of players. 
 3                 Gary Grief is the associate deputy 
 4   executive director of the Texas Lottery, and his father, 
 5   who is recently deceased, has a ranch that he leases out 
 6   to hunters.  And Gary was on that ranch one day when a 
 7   bunch of young lawyers from Georgia flew in on one of 
 8   their father's private planes to go hunting on Gary's 
 9   father's ranch.  And they got to talking to Gary, and 
10   they found out that he was with the Texas lottery, and 
11   they were very excited and wanted to hear all about the 
12   Texas lottery.  Now, these were a bunch of young 
13   lawyers.  I am betting that a bunch of young lawyers in 
14   Texas would not get excited about meeting the deputy 
15   director of the Texas lottery because we don't have the 
16   same kind of identification that they do.  But every one 
17   of these young lawyers had gone through undergraduate 
18   school on a scholarship paid for out of lottery money, 
19   so they were not only fans of the lottery, they played 
20   the lottery and thought it was a great thing to play. 
21                 Well, I don't know how you take that idea 
22   and tie it into bingo, and I don't think that you can 
23   necessarily do it without some new products.  Clearly 
24   our people know and Billy communicated to us yesterday 
25   some of the new products that other jurisdictions have 
0122
 1   and that y'all will be asking the legislature to give 
 2   you.  But I think a focus around the charities,  the 
 3   beneficiary of the games to an extent greater than you 
 4   do that would be a good thing. 
 5                 Now, Kimberly, you've told me about how 
 6   you do that in your parlor.
 7                 MS. ROGERS:  Yes.
 8                 COMMISSIONER COX:  And you might just tell 
 9   them a little bit about how you do it.
10                 MS. ROGERS:  In reference to letting 
11   our -- the customers know? 
12                 COMMISSIONER COX:  Uh-huh.
13                 MS. ROGERS:  Okay.  We did -- we made 
14   posters.  We just used very simple poster board, and we 
15   put up -- I had each one of the charities that were 
16   there that play give us photographs of what they do, 
17   what they use their money for.  We have Lion's Clubs 
18   that buy glasses, hearing aids.  They go into Mexico and 
19   provide wheelchairs, you know, just different things but 
20   things they've done with their lottery -- their -- I'm 
21   sorry -- bingo funds, and we put that up on our walls 
22   for each one of the charities, and that way people can 
23   see, you know, where their money is going, you know. 
24                 Then a lot of them were scholarships.  A 
25   lot of scholarships go with our charities.  And so then 
0123
 1   they get a real feel -- we even put up one time -- we 
 2   posted off the web site -- the Lottery Commission's web 
 3   site as to how much money goes to charities, how much 
 4   money, you know, was given back to the customers and 
 5   things like that. 
 6                 COMMISSIONER COX:  And one of the things 
 7   that we continually do on the lottery side is we 
 8   continually point out how much money the lottery has 
 9   paid to state education, to the state treasury, and most 
10   recently since '97 to the foundation for education.  
11   That number is about to be 12 billion dollars in the 
12   brief history of the lottery.  And it might well be that 
13   if y'all made -- in your halls made it known how much 
14   that hall had contributed to charity over its history -- 
15   I don't know.  Maybe you-all do that.  But that could 
16   help. 
17                 But I think trying to identify more 
18   closely with the charities, with the good and valid, 
19   important purpose that bingo has could be a real 
20   important way to advance things along with your quest 
21   for new tools.  There's no doubt that you need new 
22   games, you need new limits, and as a private citizen, 
23   you know, I would support those if I could.  And if 
24   called upon by the legislature, I will tell them that I 
25   agree with the industry that those are things that are 
0124
 1   needed.  But I think the charity side of it is a real 
 2   important one to look at very carefully. 
 3                 I think that to the extent that the 
 4   legislature looks at this as a cash cow, it might be 
 5   helpful to help them realize that the real cash is not 
 6   coming to the state coffers but rather is going to the 
 7   charities.  I don't know the legislative intent, Billy, 
 8   but I bet it was never intended to raise a lot of 
 9   revenue.  I'm betting it was probably intended to raise 
10   enough cost to cover -- enough money to cover the cost 
11   of regulation with the money to go to charity, and I 
12   hope that if that was the intent, that people will 
13   recognize that was the intent and keep it that way.
14                 MR. ATKINS:  Well, I don't know if there 
15   was ever a specific legislative intent that was attached 
16   to the original Bingo Enabling Act, but I know that, for 
17   example, in the Appropriations Act we're charged with 
18   collecting enough revenue through license fees to fund 
19   the cost of the administration. 
20                 Now, at the time the original act was 
21   first developed, again, bingo was the first gambling 
22   activity that was authorized in the state of Texas, and 
23   so there was a provision made for local jurisdictions to 
24   receive a share of the revenue collected for what was 
25   assumed at the time to be additional expenses on their 
0125
 1   behalf in terms of regulatory control. 
 2                 COMMISSIONER COX:  Suzanne, are there any 
 3   other --
 4                 CHAIR TAYLOR:  You and I talked about 
 5   this -- what Billy was just saying as to the local 
 6   jurisdictions.  One more weird thing is that when you 
 7   take your license down to the police department, they 
 8   don't know what to do with it.  That would be the -- 
 9   when looking at the local jurisdictions.  They file 13 
10   it.  They don't have a clue what to do with it.
11                 COMMISSIONER COX:  Really? 
12                 CHAIR TAYLOR:  Really.  Every time I take 
13   one down and drop it off, I know they throw it in the 
14   garbage because they ask me every time, "What's it for?"
15                 COMMISSIONER COX:  So it's not right on 
16   the top of their mind.
17                 CHAIR TAYLOR:  I don't think so.
18                 MR. WHITTINGTON:  I don't think it's on 
19   the top of anybody's mind.  They really don't know what 
20   bingo is all about.  That's from the mayor clean down to 
21   the police department.  They don't know what bingo is 
22   about.  They think it's just gambling, so --
23                 COMMISSIONER COX:  And I think the 
24   thing -- the thing that you've got to distinguish it 
25   from gambling is the same thing the Georgia lottery has.  
0126
 1   You've got good charitable purposes that you can point 
 2   to like Kimberly is doing in her hall, and that's a way 
 3   to move it over into the entertainment-for-a-good-cause 
 4   category and out of the gambling category. 
 5                 CHAIR TAYLOR:  I absolutely agree with 
 6   you.  I know David Heinlein's been working on that, too.  
 7   Thank you again. 
 8                 COMMISSIONER COX:  Thank you.
 9                 CHAIR TAYLOR:  Any other discussion on 
10   this topic?  Then I believe we're on No. 8, "Report and 
11   possible discussion and/or action on the activities of 
12   the alternative styles of bingo games, including 
13   Internet gaming subcommittee."  Danny? 
14                 MR. MOORE:  Yeah.  We haven't had any 
15   meetings since August.  Jack and I talked a couple times 
16   about -- we got a booklet from the bingo staff on 
17   Internet gaming that's pretty -- there it is.  It's 
18   pretty thick. 
19                 One thing funny I read in the Houston 
20   Chronicle about three weeks ago, it stated how popular 
21   Internet poker has become, and we all know by watching 
22   ESPN every day that there's a lot of people that are 
23   changing their lifestyles to gamble, whether it's on the 
24   Internet or going to Vegas.  But in the article it said 
25   the major poker sites, in January of '03 there was 11 
0127
 1   million dollars bet on it, and in September of '04 there 
 2   was 136 million.  So to me that's an impact. 
 3                 Whether it -- it trickles down to bingo, 
 4   I'm quite sure that some of our people are doing the 
 5   same thing.  People are changing their lifestyle or 
 6   their jobs to do it.  You know, it's kind of similar to 
 7   when they had day traders, you know, and this is -- it's 
 8   interesting to see, and I think all this has an impact 
 9   on bingo.  It will be interesting to look more into 
10   that, but, you know, I think obviously with this session 
11   coming up now, that we need to really look at what the 
12   impact of video lottery is going to be on bingo, which I 
13   think we all know is going to be difficult to compete 
14   with.  So I think that we'll probably have a couple 
15   meetings here in December to get everybody up to speed 
16   on what the coalition is doing, right, Steve? 
17                 MR. FENOGLIO:  Yes. 
18                 MR. ATKINS:  Okay.  That's it.
19                 CHAIR TAYLOR:  Any other discussion?  Any 
20   public comment on this item?  We are going to go ahead 
21   and combine Items No. 9 and 10 on the agenda.  That's 
22   "Report and possible discussion by the Bingo Advisory 
23   Committee work group on the review of bingo forms and 
24   applications," and "Report and possible discussion by 
25   the Bingo Advisory Committee work group on the Quarterly 
0128
 1   Report revision, implementation, and notification."
 2                 MR. MANIO:  I believe that Terry and Tom, 
 3   they have prepared a short presentation, but before we 
 4   turn the floor over to them, I would like to make a few 
 5   remarks.  This work group was originally chaired by 
 6   Patricia Greenfield.  She was here with us just a few 
 7   minutes ago.  And when she -- when her spot in the Bingo 
 8   Advisory Committee was vacated, Kim Rogers took over.  
 9   And so I would like to -- I would just like to recognize 
10   the contribution both from Patricia and Kim and, of 
11   course, the hard work of Terry and Tom. 
12                 Now, for those of you who have looked at 
13   all of the forms that are published by the Commission, 
14   you know that it is staggering in number.  But to make 
15   it simple, let me just say that there are two types of 
16   forms:  One are the required forms, and the rest are the 
17   optional forms.  Under the required forms you have the 
18   quarterly report forms and then the licensing 
19   application forms and some of the schedules.  On the 
20   optional forms you have things like -- or forms like 
21   the -- paper sales or tax inventory control, and those 
22   forms are not required to be used by the organizations.  
23   They are optional.  In fact, the number that I got from 
24   Terry is that only about ten percent of the charities 
25   today are using the optional forms. 
0129
 1                 The required forms, however, that's a 
 2   different matter.  These are the prescribed forms that 
 3   are required by the Commission to be used by charitable 
 4   organizations, and a good example would be the quarterly 
 5   reports.  In the -- in the last BAC meeting, the 
 6   quarterly reports, as revised by the work group, have 
 7   already been presented initially to the BAC, and I think 
 8   it was mentioned at the time that we had to divide the 
 9   quarterly reports into two:  one for conductors that are 
10   not members of a unit, and that same form can be used by 
11   a unit; and then there's a new quarterly form for 
12   members or for charities that are members of a unit. 
13                 And I believe I mentioned, too, at the 
14   time that the new forms are not more complex.  They're 
15   just longer because of the changes in the Bingo Enabling 
16   Act.  And some of you when you see the Schedule A and B 
17   will probably raise some eyebrows or maybe ask some 
18   questions because in a section of the Schedule A and B 
19   we have required the charities to list every single 
20   donation that they make -- they made, who it was paid 
21   for, the amount, and for what purpose.  And I have 
22   already heard some objections about the additional 
23   recordkeeping requirements, and my reply would be this 
24   is just normal business practice for any business to 
25   record information about every check that they will 
0130
 1   write.  And what the -- what the Schedule A and B is 
 2   doing now is just providing the charities with a vehicle 
 3   where all of those charitable contributions can be 
 4   consolidated in one place, so it will be easier for 
 5   bookkeeping and for auditing. 
 6                 And with that introduction, I would like 
 7   to turn it over to Tom and Terry.
 8                 MS. SHANKLE:  Just one moment.  We're 
 9   experiencing technical --
10                 MR. ATKINS:  There you go. 
11                 MS. SHANKLE:  Okay.  Okay.  Good.  Thank 
12   you. 
13                 Good afternoon.  My name is Terry Shankle.  
14   I'm the accounting services manager, along with 
15   Tom Lieck who is the audit coordinator from San Antonio.  
16   We are here to give you a preview of the revised 
17   quarterly report schedules and automated forms manual 
18   and to answer any questions that you may have. 
19                 Back in April the forms work group met to 
20   begin reviewing the impact of House Bill 2519 that had 
21   on the quarterly reports as well as charitable bingo 
22   administrative rules, charitable use of proceeds, and 
23   unit accounting.  In August the work group presented to 
24   the BAC the proposed revisions to the quarterly report 
25   and schedules and since that time have been working with 
0131
 1   information technology to incorporate the changes into 
 2   the ACBS. 
 3                 In September the work group met to discuss 
 4   the revisions to the automated forms manual so that it 
 5   would correspond to the revised quarterly report and 
 6   would be available for use January the 1st, 2005.  Also 
 7   during the discussion we started preparing for a new 
 8   non-annual temporary quarterly report.
 9                 I would like to briefly give you a 
10   timeline of what our plans are to roll out the quarterly 
11   report schedules and automated forms manual.  On October 
12   21st, the charitable bingo web site news alert was 
13   updated with the information regarding the quarterly 
14   report and schedules.  Also, the Bingo Bulletin for 
15   October, November, and December had an article 
16   discussing the report and schedules. 
17                 In December the Charitable Bingo Division 
18   will send a special mailing to all licensees with more 
19   in-depth instructions on when the report schedules and 
20   automated forms manual will be available and how and who 
21   needs to complete them. 
22                 January 1st, 2005, the automated forms 
23   manual will be ready for use.  The Bingo Bulletin will 
24   go into greater detail on completing the forms and will 
25   have another special mailing. 
0132
 1                 The middle of March the revised quarterly 
 2   report and new schedules for the first quarter 2005 will 
 3   be mailed to all licensees with a due date of April 
 4   25th. 
 5                 If no one has any questions, Tom and I 
 6   will start our presentation.
 7                 First on our slide is the non-annual 
 8   temporary quarterly report.  This is the new non-annual 
 9   temporary quarterly report that organizations holding 
10   just temporary occasions will complete after their 
11   temporary game.  In the past these organizations would 
12   complete the old quarterly report just like the annual 
13   licensed organizations.  The old form was very confusing 
14   to those that would complete it only once or twice a 
15   year.  The work group came up with a shorter and 
16   friendlier version of a quarterly report that is not so 
17   intimidating and easier to complete.
18                 This is the revised quarterly report that 
19   will be filed by units, conductors, and conductors who 
20   are also lessors.  In the past if an organization was 
21   both a conductor and a lessor, they were required to 
22   file two separate quarterly reports, one for each 
23   license type.  Now they just have to file one. 
24                 I would like to say that even though the 
25   revised quarterly report is two pages, most of the 
0133
 1   information is still the same.  Some of the cosmetic 
 2   changes to the revised report is that the font size is 
 3   much larger so it is easier to read, and also we changed 
 4   some of the placement of information so that it would be 
 5   easier to complete as well as reflect some of the terms 
 6   defined in the Bingo Enabling Act, such as gross 
 7   receipts, bingo prizes, cost of goods purchased are now 
 8   positioned together so that it is easier to calculate 
 9   their adjusted gross receipts as defined in the Bingo 
10   Enabling Act.  Cost of goods purchased includes both 
11   cost of goods sold -- sold as well as lease payments to 
12   distributors.
13                 Beginning with 1a -- beginning with 1a 
14   through 6a, an organization will calculate the required 
15   prize fee amount and, if applicable, penalty and 
16   interest owed to the State.  If they are also a lessor, 
17   then they will complete 7a through 12a and on 13a will 
18   total the two amounts. 
19                 On page 2, approved loans, bingo interest, 
20   merchandise prizes donated, and prize fees included -- 
21   and prize fees withheld have been located together in 
22   the "Other Income" section. 
23                 Next is expenses.  This category is where 
24   most of the revisions occurred.  Starting with line 25 
25   through line 33, the line items reflect those expenses 
0134
 1   that are allowed by the Bingo Enabling Act.  By breaking 
 2   out the allowable expenses, we will be able to report to 
 3   the legislature and bingo industry more meaningful 
 4   information and be able to analyze and evaluate the data 
 5   so better decisions and policies can be made.  "Net 
 6   Proceeds" is also a new line item and fits in with the 
 7   definitions of "net proceeds," which is gross receipts 
 8   and rent income less authorized expenses. 
 9                 "Previous Proceeds Undistributed" is not a 
10   new required field.  This line will be preprinted as it 
11   was on the old quarterly report.  "Available Net 
12   Proceeds" is a new line which is the total of the 
13   current quarter's net proceeds plus the previous 
14   quarter's undistributed proceeds.  "Charitable 
15   Distribution," this is not a new line, however 
16   Schedule A and Schedule B are. 
17                 Schedule A, charitable distributions.  
18   Charitable Bingo Administrative Rule 402.598 requires 
19   that every organization licensed to conduct bingo files 
20   Schedule A with the Texas Bingo Quarterly Report or as a 
21   supplement to the Texas Bingo Unit Member's Quarterly 
22   Report even if no games were held during the quarter. 
23                 The organization will enter the date of 
24   each check, the recipient, and the amount of the 
25   distribution -- and I'm sorry -- and the amount by 
0135
 1   distribution classification.  Every distribution must be 
 2   used for a cause, deed, or activity dedicated to the 
 3   organization's charitable purpose that is consistent 
 4   with their 26 USC Section 501 tax exemption and for the 
 5   purpose or objective for which they qualify as an 
 6   authorized organization.  And this is, as Commissioner 
 7   Cox was suggesting, that we will be able to identify 
 8   those items and the recipients of the charitable 
 9   distributions and how they benefit for charitable 
10   causes.  The charitable distribution should be 
11   classified as applicable to the organization and 
12   their exempt status as charitable, religious, 
13   education/scholarship, exempt social activities, or 
14   exempt administrative expenses.
15                 Schedule B, charitable distributions for 
16   accounting units.  Every unit must file a Schedule B 
17   with their quarterly report even if no charitable funds 
18   were disbursed. 
19                 Schedule B is divided into two parts.  The 
20   first part is "Transfers to Unit Members for Charitable 
21   Distributions."  Each organization that was part of the 
22   unit for that quarter will be listed along with their 
23   taxpayer number, the amount transferred from the unit to 
24   the member's bingo fund for distribution by the member, 
25   and the number of occasions including temporary 
0136
 1   occasions that each member conducted during that 
 2   quarter.
 3                 The second part of Schedule B, "Charitable 
 4   Distributions from Unit Bingo Account," is for any 
 5   charitable distributions made directly from the unit 
 6   bingo account on behalf of a unit member.  The 
 7   information required is the same as Schedule A with the 
 8   addition of a "Code" column.  "Code" is the number next 
 9   to the member's organization name from the "Transfers to 
10   Unit Members" section and is used to identify on which 
11   organization's behalf each charitable distribution was 
12   made.
13                 The unit will enter the date, name of the 
14   recipient of the distribution, check number from the 
15   unit's bingo account, and the classification of whether 
16   the distribution was for charitable, religious, 
17   education/scholarships, exempt social activities, or 
18   exempt administrative expenses.  Every distribution must 
19   be used for a cause, deed, or activity dedicated to the 
20   charitable purpose of the organization that is 
21   consistent with the 26 USC Section 501 tax exemption and 
22   for the purpose or objective for which that -- that 
23   qualify as an authorized organization.
24                 Next, we have the Texas Bingo Unit 
25   Member's Quarterly Report which every member of the unit 
0137
 1   must file, even if no games were conducted or no 
 2   distributions were received from the unit during the 
 3   quarter.  The member organization will report the amount 
 4   of charitable distributions transferred to them from the 
 5   unit and their prior quarter's undistributed proceeds.  
 6   When an organization joins a unit for the first quarter, 
 7   they will show the amount transferred to the unit.  The 
 8   member will show the total charitable distribution 
 9   amount that was disbursed from their bingo funds.  The 
10   distributions will be detailed on Schedule A located on 
11   the -- at the bottom of the report.  If needed, a 
12   Schedule A continuation sheet should be used. 
13                 And with that, I'm going to turn over the 
14   automated forms manual to Tom Lieck. 
15                 MR. LIECK:  I'm Tom Lieck.  I'm the 
16   regional audit coordinator out of San Antonio.  And we 
17   have available the -- what we call Automated Forms 
18   Manual.  It's on our web site.  It's been updated to 
19   reflect the changes in the quarterly report, and these 
20   are changes that have been -- these changes may have 
21   been suggested by the BAC quarterly form group and the 
22   staff.  
23                 The first schedule that's changed is the 
24   Sales Journal.  The quarterly report line references on 
25   the sales journals were updated, and a column for 
0138
 1   non-cash prizes was added.  As before, no entries are 
 2   required on the sales journal since all of the 
 3   information flows from the daily cash reports and 
 4   schedules of prizes. 
 5                 The Cash Disbursement Journal was expanded 
 6   to include a column for each of the expense lines on the 
 7   revised quarterly report.  The other expense and 
 8   explanation columns were deleted due to the quarterly 
 9   report changes.  Adding the column for each of the 
10   expense items on the quarterly report and deleting the 
11   explanation column should actually save some time in 
12   completing this journal because each expense has its own 
13   column, and writing the explanation is not necessary.  
14                 The "Daily Floor Sales by Usher," the only 
15   revision to this form is the game number sales has been 
16   unprotected to allow the organization to change the game 
17   number if needed.  This was requested by an organization 
18   that did not have floor sales for each game but had more 
19   than 15 games, which is the limit on this schedule. 
20                 The "Daily Cash Report."  Two items were 
21   added to the Daily Cash Report as suggested by the BAC 
22   form work group.  A subtotal for total set and floor 
23   sales was added, and a line for non-cash prizes was 
24   included. 
25                 The daily schedule of prizes, following 
0139
 1   the suggestion of the BAC forms work group, a column for 
 2   the non-cash prize amount was also added to this 
 3   schedule. 
 4                 MS. SHANKLE:  I would just like to close 
 5   with saying that we had the internal auditors review the 
 6   quarterly reports to ensure that we were within the 
 7   rights of the Bingo Enabling Act asked -- the questions 
 8   or the line items that we were asking to be completed, 
 9   and we received their answer yesterday, and the overall 
10   conclusion was, "Based upon the results of the review, 
11   the proposed quarterly reports for Texas bingo 
12   conductors accurately reflect the changes to the Bingo 
13   Enabling Act."  And one thing that they did state in 
14   their noteworthy accomplishments is that it was more 
15   descriptive than the current form and also that the new 
16   form should be easier for organizations to use and to 
17   understand which will provide improved customer service 
18   for bingo conductors. 
19                 If you have any questions, Tom and I will 
20   be glad to answer any at this time. 
21                 CHAIR TAYLOR:  I had one question.  On the 
22   charitable distributions, Schedule A, is that the 
23   distribution out of the bingo account to the charities?  
24   Is that the end of that particular thing, or does it 
25   track it from the general account when checks are 
0140
 1   written out? 
 2                 MR. LIECK:  And you're talking about an 
 3   organization not in a unit? 
 4                 CHAIR TAYLOR:  Right. 
 5                 MR. LIECK:  That's when the distribution 
 6   is made for a charitable purpose.
 7                 CHAIR TAYLOR:  From the bingo account to, 
 8   for instance, the general account? 
 9                 MR. LIECK:  Right.  But then we get -- 
10   what is used for the general account needs to be listed.
11                 CHAIR TAYLOR:  So that you're going to 
12   have to -- whenever they -- it goes to the general 
13   account, and then you have to track it from the general 
14   account -- out of the general account? 
15                 MR. LIECK:  You have to --
16                 CHAIR TAYLOR:  Let me give you an example.  
17   Maybe it will make it easier.  I disburse $100 from the 
18   bingo account to the general account, and I'm showing 
19   that on this distribution form.  Now, once it gets to 
20   the general account, they spend $50 to the women's 
21   shelter and $25 for something at school.  Do I track 
22   those two checks separately, also?  Do I say 50 went 
23   here and 25 went there, or did I already account for the 
24   100 when it went from my bingo account into the general 
25   account? 
0141
 1                 MR. LIECK:  My understanding of the new 
 2   rule is that the use has to be listed on here, so you 
 3   would list what the general account used it for.  So, 
 4   yes, it would be possibly two entries.
 5                 CHAIR TAYLOR:  Okay.  And does it count as 
 6   a distribution if it went to the general account and 
 7   they didn't use it all within that quarter? 
 8                 MR. LIECK:  It has to be for a purpose 
 9   of --
10                 CHAIR TAYLOR:  What if they're saving for 
11   a scholarship fund?
12                 MR. LIECK:  As long as that's documented 
13   that they're saving for a scholarship fund and that 
14   money is earmarked for that scholarship fund, yes.
15                 CHAIR TAYLOR:  And if they're saving for a 
16   building fund or something -- I'm just trying to think 
17   of some things -- you know, maybe they're saving for 
18   Youth City Christmas Shopping Spree, and so they're 
19   saving up --
20                 MR. LIECK:  Right.  It's got to be 
21   identified what they're --
22                 CHAIR TAYLOR:  Okay.  They're going to 
23   identify that in this, also? 
24                 MR. LIECK:  Yes. 
25                 CHAIR TAYLOR:  Is there any other 
0142
 1   discussion on this? 
 2                 MR. WHITTINGTON:  Well, we gonna do it, 
 3   and I hope this penalty thing is not in effect when we 
 4   do it. 
 5                 CHAIR TAYLOR:  I just -- I do bookkeeping 
 6   for Campfire, and I know that I know from their bingo 
 7   account when it goes to their general account, but I 
 8   don't see their general account, so I was just thinking 
 9   of the implications that means for trying to do this 
10   quarterly report form anymore --
11                 MR. WHITTINGTON:  Yeah.
12                 CHAIR TAYLOR:  -- as a freebie. 
13                 MR. LIECK:  Well, that's part of the Rule 
14   402.598 specified that had to be detailed.  That's why 
15   it changed. 
16                 CHAIR TAYLOR:  And it has to be detailed 
17   for all organizations?  I thought 501(c)(3), once it 
18   went into their bank account, that that was the end of 
19   it and that the -- like the other c's would have to go 
20   in through the general account.  That's not accurate 
21   then? 
22                 MR. LIECK:  If that's their charitable 
23   purpose as their tax exemption status in that, 
24   501(c)(3), I would think that would be it. 
25                 CHAIR TAYLOR:  Is there any public comment 
0143
 1   on this item?  
 2                 MR. FENOGLIO:  Yes.
 3                 UNIDENTIFIED SPEAKER:  Everybody jump up. 
 4                 MR. FENOGLIO:  If we may, Madam Chair, I 
 5   think we have a panel that might make it a lot quicker.  
 6   My name is Stephen Fenoglio.  I've already appeared 
 7   today.  With me is Sharon Ives with Fort Worth 
 8   Bookkeeping and Trace Smith who is a charity 
 9   representative from Texarkana. 
10                 I did not understand until today -- and I 
11   don't recall seeing when it was circulated, the original 
12   draft of the new -- and I -- my comments are as it 
13   relates to both the regular conductor and the unit.  I 
14   don't have any comments to make about non-annual 
15   temporary quarterly report. 
16                 I did not understand until your questions 
17   -- and I was actually earlier reading the back -- and 
18   these aren't paginated, but it's the discussion on the 
19   back side of Schedule A or Schedule B that discusses 
20   classification of charitable distributions.  Because 
21   when I read it initially, my comments to Phil Sanderson 
22   several weeks ago were the Schedule A "Date," 
23   "Distribution Recipient," "Check Number," "Charitable" 
24   was as you had laid it out, Madam Chair, in that a 
25   $5,000 check from the unit account of River City Bingo 
0144
 1   unit in Austin, Texas, at Braker Lane and I-35, is made 
 2   to the general fund of the Arc of the Capital Area, a 
 3   501(c)(3) organization that's been in business for 52 
 4   years and provides services to special-needs children 
 5   and their family members, I thought that was the end of 
 6   it. 
 7                 But with the discussion that just 
 8   happened, I now know that that's not the end of it.  
 9   That's just the beginning.  Because that $5,000 is used 
10   for a variety of purposes by the Arc, and in the quarter 
11   that would end on March 31 -- and the way the River City 
12   Bingo charities, we meet monthly, and we get 
13   distribution checks monthly.  The distribution check for 
14   the month ending in March we may not receive until the 
15   third week in April.  That money won't be spent by the 
16   time this quarterly report is filed. 
17                 And so you've got, number one, a timing 
18   problem, and you are setting up whoever is going to sign 
19   this for absolute failure because they're not going to 
20   be able to testify or state under oath or in the 
21   affirmation as to the purpose.  They know the $5,000 
22   check was sent to the general fund, but the general fund 
23   hasn't spent it yet.  And since the Arc's budget is 1.2 
24   million dollars a year and bingo is roughly 70,000 a 
25   year times five charities or four other charities, you 
0145
 1   can get the idea of this is going to create huge 
 2   accounting problems for that charity times four other 
 3   charities at River City Bingo. 
 4                 Family Elder Care is another charity.  
 5   Their budget is about three and a half million a year.  
 6   And how you're going to expect them in an affirmation to 
 7   say of the roughly 12 to 15,000 we got on a quarterly 
 8   basis, 3,000 went to maintenance of the building -- and 
 9   I'm making it up -- 3,000 went to salary, 3,000 went to 
10   delivery of services is going to be extremely difficult 
11   in that time frame.  Over a period of a year they can 
12   tell you how they spent it, but in that narrow quarter 
13   they cannot necessarily tell you.  And I think it's 
14   setting up charities for lying under -- on a government 
15   form, which from my memory is a Class -- either a 
16   misdemeanor or a felony depending on the prosecutor's 
17   discretion. 
18                 So -- and, again, I did not understand.  I 
19   don't think the earlier draft I saw had the detail on 
20   that.  And that is a problem, and it's, I guess, a train 
21   wreck coming down the track quickly because they want to 
22   implement this immediately.
23                 I have a quick question on the expense 
24   column, and this has to do with question -- or numerated 
25   items 23 through 33, I guess, and I think the testimony 
0146
 1   was that that's the limit of what's authorized in the 
 2   Bingo Enabling Act.  That's actually not the case 
 3   because the Bingo Enabling Act limits the use of bingo 
 4   funds to reasonable and necessary expenses, and some of 
 5   those expense categories may not be in there for a 
 6   particular hall or a particular time.  It has the words 
 7   "including" and then there's an itemized list, but the 
 8   real test is, is it a reasonable and necessary expense? 
 9                 And within that then I looked at the line 
10   item instructions, and I found the word -- and, again, 
11   this isn't paginated, but it's the back side of the new 
12   quarterly report form -- the word "authorized" in there 
13   several times, but it's not used all the time.  For 
14   example, I have a question, "Enter the total" -- Item 
15   33, "Enter the total authorized amount of debit card 
16   fees ..." -- and "debit card fees" was specifically 
17   added in the last session, if memory serves me correct, 
18   in 458 -- "... bank fees and cash (over)/short from the 
19   bingo occasion." 
20                 My recollection is in all the audits the 
21   staff have always taken the position you can't use or 
22   consider bank fees and cash (over)/short as an expense 
23   under 458, but this form suggests otherwise.  And I 
24   guess it's -- and I don't need to have a clarification 
25   today, Billy, but, you know, I would like to know if the 
0147
 1   staff is taking a different view.  I have argued in the 
 2   past that it is a reasonable and necessary expense 
 3   because the bank -- Wells Fargo or -- charges you a 
 4   service fee for cash over or cash short, but 
 5   historically I've understood the auditors have always 
 6   disallowed that and forced the charities to repay at the 
 7   peril of going to a hearing.  And I think that's a 
 8   rifle-shot issue that at some point -- and, again, I 
 9   know, Billy, I'm getting you --
10                 MR. ATKINS:  Yeah.  We'll --
11                 MR. FENOGLIO:  So having said that, I 
12   think Sharon Ives has some specific questions and 
13   concerns about how from her side of the coin she is 
14   going to implement that quickly and the cost that would 
15   be involved from her side of the coin.  And y'all have 
16   gone through this months to look at it from your 
17   accounting system and with the costs that are involved 
18   in getting it set up with computer code and all that 
19   ad nauseam that I've long since forgotten how you do it, 
20   and I know you can't do it quickly. 
21                 And Sharon Ives and other bookkeepers have 
22   software systems in place to file today with the 
23   quarterly report they have.  I think -- well, she wants 
24   to talk about some of that, and then I think Trace has 
25   some specific questions, and at some point I'll be happy 
0148
 1   to respond to any questions.
 2                 MS. IVES:  Good afternoon, Madam Chairman, 
 3   members.  Sharon Ives, Fort Worth Bookkeeping.  I have a 
 4   couple of questions here, and this is regarding the 
 5   Texas Bingo Quarterly Report, second page under 
 6   "Expenses" on number 25, "Advertising, including cost of 
 7   printing gift certificates."  What about forms like your 
 8   daily cash reports, ushers sales sheets, schedule of 
 9   prizes, programs?  
10                 CHAIR TAYLOR:  I can answer that question.  
11   I asked that question last time, and that goes under the 
12   number 28.  I don't know why, but I did ask that.  I 
13   asked that same question at the last meeting.
14                 MS. IVES:  Why would that fall under -- 
15   okay.  Moving right along.  Office supplies, what 
16   category would that fall under?  Every bingo hall has 
17   Tacky Finger, paper clips, rubber bands, some --
18                 CHAIR TAYLOR:  28.
19                 MS. IVES:  That would go under 28.  Okay.  
20   Let's jump to number 30, janitorial services and utility 
21   supplies.  What's "utility supplies"?  Is that electric, 
22   water, gas?
23                 UNIDENTIFIED SPEAKER:  Toilet paper.
24                 MS. IVES:  Or is that toilet paper, paper 
25   towels?
0149
 1                 MR. MANIO:  Yes, that kind of thing.
 2                 MS. IVES:  Okay.  What about telephone, 
 3   gas, water, electric? 
 4                 CHAIR TAYLOR:  I would think that would be 
 5   utility services.
 6                 MR. MANIO:  Yes, number 30.
 7                 MS. IVES:  What about dumpster fees?
 8                 MR. MANIO: Number 30.
 9                 MS. IVES:  Same thing?
10                 MR. MANIO:  Yeah.
11                 MS. IVES:  Okay.  And on Schedule A --
12                 MR. FENOGLIO:  And let me interrupt.  I 
13   appreciate Mario's input, and that was, for the record, 
14   Mario Manio who stated that, but I don't know -- and 
15   maybe Mario's asked the question of staff and you now 
16   know that's what staff has said, but at some point we 
17   would like to know if that's the staff's view.  Because 
18   on a -- if this, in fact, is going to be implemented 
19   as -- implemented effective January 1, she needs to know 
20   those answers now so that she can start the conversion 
21   process. 
22                 And, again, I don't want to put too fine a 
23   point on it, but I don't know that Mr. Manio, who I have 
24   a lot of confidence in, is speaking on behalf of the 
25   Lottery Commission, Charitable Bingo Division or what 
0150
 1   Mr. Manio considers the position -- the correct position 
 2   to be.
 3                 MR. MANIO:  Well, what I can say is that 
 4   we discussed these items during our meetings because 
 5   these questions came up, and that's the reason why those 
 6   items were added on this list like the security, 
 7   bookkeeping, legal, and accounting services.
 8                 MS. IVES:  Right.  Talking about security, 
 9   would that be security guard service, or would that be 
10   security monitoring, your monthly monitoring fees, or 
11   would that be both?
12                 MR. MANIO:  I don't remember exactly.
13                 MS. IVES:  Well, these are some of the 
14   items that we as bookkeepers would need to know in 
15   advance.
16                 MR. MANIO:  Right.
17                 MS. IVES:  My office for the bookkeeping 
18   handles over 50 conductors, bingo bookkeeping.
19                 MR. MANIO:  Okay.  I think it's --
20                 MS. IVES:  Now, 30 --
21                 MR. MANIO:  Yeah.  You need some help 
22   here -- 
23                 MS. IVES:  Yeah.  30 of those 50 are a 
24   unit.  Pardon?
25                 MR. MANIO:  No.  I was going to ask for 
0151
 1   help --
 2                 MS. IVES:  Oh, yeah.
 3                 MR. MANIO:  -- to clarify your question.  
 4   What is security?  Is that monitoring security or 
 5   security guards?  And I don't remember exactly when we 
 6   discussed those items.  Would you be able to -- would 
 7   you remember, Terry, or -- 
 8                 MS. SHANKLE:  I'm not sure.  But I was 
 9   going to let them finish before we came back and 
10   answered. 
11                 MR. ATKINS:  Why don't you go ahead and 
12   come up now so that we can make sure that all the 
13   questions are responded to. 
14                 MS. IVES:  The position that my office 
15   would be coming from is that we handle 50 organizations' 
16   bingo bookkeeping.  We use the program QuickBooks Pro.  
17   I'm sure a lot of people around the state use the same 
18   software.  So we would need ample time to go through our 
19   chart of accounts and either reclass or rename or set up 
20   new accounts on each of these organizations.  Like most 
21   bookkeepers and CPA's, the month of January is very 
22   busy, so that is totally out of the question.  So from 
23   what I gather, this report would be used in April, 
24   correct? 
25                 MS. SHANKLE:  That is correct. 
0152
 1                 MS. IVES:  On Schedule A I had a lot of 
 2   the same concerns as Steve Fenoglio and also Madam 
 3   Chairman.  This form I'm still a little bit confused.  I 
 4   know I've been on record in the past on these same 
 5   issues.  We have the bingo checking account.  Every 
 6   month I write a check, a charity distribution to the 
 7   organization's general fund.  Is that the check that 
 8   needs to go on this Schedule A? 
 9                 CHAIR TAYLOR:  From Terry it's my 
10   understanding that check goes on, and then you have to 
11   further --
12                 MS. IVES:  There's no way.  There is 
13   absolutely no way.  I mail the charity checks out of the 
14   office on a monthly basis.  I know it's not due 
15   quarterly.  A lot of the organizations like to receive a 
16   check per month.  It keeps them on budget.  Once I mail 
17   them that check, the only thing that I know is when it 
18   clears the bank, when it clears the bingo checking 
19   account.  I have no idea what they use that money for.  
20   It's really none of my business.  They're the ones with 
21   the exemption, with the 501(c) -- whatever the number -- 
22   3, 6, whatever.  That's all I need to know.  So we're 
23   definitely --
24                 MR. ATKINS:  Tom, can you respond to that?  
25   It there is an organization with a budget of $100,000 
0153
 1   and they cut a check for $5,000 to their general fund, 
 2   how are they going to account for that $5,000 on this?
 3                 THE REPORTER:  If you could use the mic, 
 4   that would be very helpful.  Thanks.
 5                 MR. LIECK:  Mainly we just applied the 
 6   Rule 402.598 and tried to come up with a form to 
 7   document that, where the rule requires that the 
 8   distribution must be substantiated and also a licensed 
 9   authorized organization must submit quarterly on a form 
10   prescribed by the Commission a list of charitable 
11   distributions made by the organization during the 
12   quarter.  What we were trying to address at this part of 
13   the rule with the forms, that's part of the 
14   substantiation of the organization, what they're using 
15   it for. 
16                 It's a question -- you're talking about a 
17   501(c)(3), which is a charitable organization.  I would 
18   think that would probably be sufficient, that it went to 
19   that charitable organization.
20                 CHAIR TAYLOR:  And if it's a (c)(6)?  I 
21   really remember having this conversation --
22                 MR. LIECK:  Right.
23                 CHAIR TAYLOR:  -- about the fact that 
24   the -- of making people do extra work because at the 
25   time, I think if you look back, it was something about 
0154
 1   the (c)(3)'s didn't have to worry about this.  Once it 
 2   went to a (c)(3), it was out of the bingo account.  But 
 3   if it went to, for instance, a (c)(6), which I worry 
 4   about all the VFW's and all of the veterans 
 5   organizations that are (c)(6)'s, that this additional 
 6   paperwork would have to be done, which would make them 
 7   not welcome in a lot of units because it's going to 
 8   create, as you're talking about, a lot of work to track 
 9   every penny out of their general fund then, and that 
10   worried me.
11                 MR. FENOGLIO:  Just for the record, the  
12   organization -- not a (c)(6) but under the 26 USC 
13   Section 501. 
14                 And I guess what I hear Tom saying is 
15   they're trying to implement a rule, but it's a new twist 
16   on how they implement that rule because your old form 
17   didn't have this type of detail that you're wanting to 
18   move to.  And I don't know what the solution is, but I 
19   can see a train wreck occurring, Billy, with what Tom 
20   wants to get accomplished in having that specific detail 
21   and what a bookkeeper like Sharon Ives has available to 
22   her, which is not the specific detail. 
23                 The practice in the past has been that 
24   issue bubbles to the surface directly in an audit or 
25   even a review, and what I -- I think what I try -- what 
0155
 1   I see y'all trying to accomplish in this is one -- one 
 2   simple form of two pages that you can get a lot of data 
 3   and you can shove into a report to the legislature, and 
 4   I've been in some of those discussions when the 
 5   legislature is asking, "What are they using the bingo 
 6   funds for?"  And sometime y'all said, "Well, we really 
 7   don't know," you know, and -- you know, as a general 
 8   rule you've never had this type of detail. 
 9                 I mean, I think from our perspective we're 
10   not saying we don't want you to have the data, but what 
11   y'all have set up is more than what we can do today to 
12   get you the data, and it may be that there has to be, 
13   God forbid, another report from the charity's general 
14   fund that's going to detail that.  But, again, some of 
15   the timing issues, you can't do it on that quarterly 
16   basis because some of those funds aren't going to get 
17   spent, and, you know, a lot of nonprofits are like -- 
18   their general fund workers are overworked and underpaid.  
19   How many times have y'all heard that, "We want you to do 
20   more with less"?  And here's going to be another 
21   requirement they're being mandated to do to fill out 
22   another form, and it may drive other people away. 
23                 But before we go there, I think this is a 
24   problem that I don't think anyone on our side of the 
25   table -- and we appreciate the circulation of these 
0156
 1   drafts -- understood the magnitude of this level of 
 2   detail that y'all want to capture in one form on a 
 3   quarterly basis.  And I just see this as a huge -- from 
 4   what Tom wants.  And I understand why he wants it, and 
 5   I'm saying that because I want the people in the 
 6   audience to understand that y'all are getting sometimes 
 7   beaten to say, "Well, what are they using their funds 
 8   for?" at the legislature.  "Why can't you tell us, Billy 
 9   Atkins, what" -- you know, "There's 20-some-odd million 
10   dollars in charitable distributions.  Why can't you tell 
11   me what they're using it for?" 
12                 And so that's where y'all are coming from, 
13   I think, in large part wanting that detailed data.  But 
14   from our perspective on our side, it is going to be 
15   impossible -- maybe not impossible.  It is going to take 
16   a lot of effort and cost in moving people who maybe move 
17   slower than we would want them to to get that type of 
18   data by April 25.  And so --
19                 MR. ATKINS:  So do you have suggestions?
20                 MR. FENOGLIO:  I think one suggestion is 
21   your timeline is too aggressive by April 25.  It may be 
22   that you give the charities the option for a quarter to 
23   use either this form or another form or the old form.  
24   Now, I know y'all don't want to do that, and I say 
25   that -- I think I know why y'all are doing it, and you 
0157
 1   want to get it done so a year from now you've got a 
 2   year's worth of good data, and maybe the charities can 
 3   come back and report some of the same data that you want 
 4   on this report at a later time after they've gotten 
 5   comfortable with the form.  I don't know. 
 6                 But I just see this as -- I don't have a 
 7   problem -- and I know about how the Arc of the Capital 
 8   Area works because I've been on their board for 12 
 9   years.  They can't tell you that on April 25 what they 
10   used all of that money for, and if you want them to, 
11   they're going to misstate or -- you know, intentionally 
12   or otherwise.  They can't tell you what they spent all 
13   that money for.  They know what some of the money went 
14   for, but they can't tell you all. 
15                 And they're, I think, one of the more 
16   sophisticated charities because, again, they've got 
17   about a 1.2 million dollar budget.  Bingo is an 
18   important aspect, but it's not the overwhelming aspect, 
19   as opposed to other charities who have a lot smaller 
20   budget or bingo plays a far larger portion of their -- 
21   so --
22                 MS. SHANKLE:  This is just off of the top 
23   of my head, that if indeed the organizations are going 
24   to have a hard time identifying the funds that they're 
25   giving to charity, that either the Schedule A and 
0158
 1   Schedule B may be due 10 days or 15 days after the 
 2   quarterly report.  We just want to be able to tie back 
 3   those figures to the quarterly report and to the 
 4   member's quarterly report to ensure that one is 
 5   balancing with the other. 
 6                 MR. ATKINS:  Well, my understanding, 
 7   Steve -- and I apologize for this -- is that you had 
 8   been copied on all these and were aware of all these.  
 9   So I would suggest that -- I'm sorry?  You --
10                 MS. SHANKLE:  Members of the work group, 
11   which is Mario, Kimberly, and Pattie, were all in on the 
12   new forms revisions.  The Steve's were not.  Steve 
13   Fenoglio and Steve Bresnen were not.
14                 MR. ATKINS:  Okay.  It was --
15                 MR. FENOGLIO:  I did get at one point, 
16   maybe two or three weeks ago or a month ago -- because I 
17   had talked with Phil.  He was bringing me up to speed on 
18   what was going on, and, yeah, you forwarded it to me, 
19   but I never saw -- I don't recall.  I'll have to go back 
20   and check.  I never saw the back side, which was the 
21   first time that the detail -- and the devil's in the 
22   details sometimes, Billy.  We all know that.
23                 MR. ATKINS:  Right.
24                 MR. FENOGLIO:  That was -- I mean, when I 
25   first -- the first page of Schedule A I don't have a 
0159
 1   problem with.  And I say that.  I don't know if Sharon 
 2   does or Trace or anyone else does, but that to me -- 
 3   well, I do -- I have a question on what's exempt social 
 4   activity, exempt administrative expense, and we can talk 
 5   about that now or later.  You know, I think I know, and 
 6   I think that has to go with an IRS designation, but you 
 7   never defined it anywhere what you mean.  If you don't, 
 8   as you know, that may suggest people are going to take 
 9   different views. 
10                 And I don't want to bore that, but I never 
11   saw this detail in which for the first time explained 
12   what in my mind Tom wanted, not -- because I was 
13   thinking in terms of the Arc of the Capital Area, check 
14   number, check charitable, and that's it.
15                 MS. ROGERS:  I would like to say one 
16   thing, also.  I apologize, and the only thing I can 
17   blame it on is my getting it on the end.  But I also 
18   thought that this charitable distribution form meant 
19   when the check goes from the bingo funds to the general.  
20   I did not know that -- and it's my own ignorance, my own 
21   fault; I take the blame -- that they would have to track 
22   each and every check. 
23                 Because when you have -- just for an 
24   instance, just right quick, same thing Ms. Ives was 
25   saying, when you have a bookkeeper for a bingo hall, she 
0160
 1   does not see the general bank statements.  And as far as 
 2   I understand, a 501(c)(3) can use money for postage -- 
 3   am I in the right exemption there?  I'm looking at Tom.  
 4   Is that correct?  They can use it for rent, they can use 
 5   it for --
 6                 MR. ATKINS:  Let me -- Kimberly, let me 
 7   jump in real quick.
 8                 MS. ROGERS:  Okay.
 9                 MR. ATKINS:  I want to make sure that 
10   neither you nor anyone else looks to Tom as an expert on 
11   the Federal Tax Code.
12                 MS. ROGERS:  No.  I only said that because 
13   I have compliance review.
14                 MR. ATKINS:  Because no one in this 
15   division -- and this is a conversation that we've been 
16   having for a long time -- is or is going to become an 
17   expert on the Internal Revenue Service.
18                 MS. ROGERS:  In my own defense, I only say 
19   that because Fuerza Unida had a compliance review, and 
20   Tom was asked by the auditor, and I was there with him, 
21   and so he was able to clarify their license, which is a 
22   501(c)(3), so I know that he does, you know, for that 
23   one.  That's the only reason why I looked to you.  I 
24   apologize.  I don't mean to put you -- anyway, I did not 
25   know that meant they had to track every single check out 
0161
 1   of their journal -- their general account, and that 
 2   would be very difficult, so --
 3                 MS. SHANKLE:  Well, I am going to say this 
 4   on Tom's defense.  It is not Tom.  It is the use of a 
 5   private and charitable use of proceeds rule that told us 
 6   how to -- to lay this form out and the questions to ask 
 7   on it, so he's not the bad one.
 8                 MS. ROGERS:  No, no, no.  I'm not saying 
 9   that.  I'm saying in my own defense I did not know.  I'm 
10   admitting what I did not know.  Okay.  I only looked at 
11   Tom to say for a 501(c)(3) they can spend money on 
12   numerous different things, not just -- you know -- 
13   right.  Yes. 
14                 MR. WHITTINGTON:  I think as far as being 
15   a part of the BAC -- this is the first time I've ever 
16   seen these forms.  I mean, I know y'all had a committee, 
17   but this is -- these are new forms, right? 
18                 MS. SHANKLE:  Yes.
19                 MR. WHITTINGTON:  I mean, they can be 
20   revised to suit everybody, I'm sure, in some kind of 
21   way, and I really think they should be looked at and 
22   talked about and definitely redone to fit everybody's 
23   needs, especially the charity instead of just saying, 
24   "This is the way it's going to be," because this is the 
25   first time I've ever seen it until yesterday evening 
0162
 1   myself.
 2                 MR. MANIO:  With all due respect, Larry, 
 3   this was brought out in the last BAC meeting --
 4                 MR. WHITTINGTON:  I understand that.
 5                 MR. MANIO:  -- and I think you were not 
 6   here at the time. 
 7                 MR. WHITTINGTON:  Okay.
 8                 MR. ATKINS:  But the notebook was sent 
 9   out, and the notebook did have the forms in it. 
10                 MR. WHITTINGTON:  What notebook? 
11                 MR. ATKINS:  For the last meeting. 
12                 MR. WHITTINGTON:  Okay.  I got that that 
13   Wednesday.  I was so discombobulated when I got in 
14   Tuesday night.  I got home Wednesday, and all of a 
15   sudden the meeting was going on when I read it.  I just 
16   forgot all about it. 
17                 MR. ATKINS:  Well, I'm thinking -- my 
18   recommendation would be if the work group can meet with 
19   Mr. Fenoglio and those individuals with comments and 
20   address those comments and see how either these forms 
21   can be revised or take under advisement.  I don't know 
22   with the changes being made to the system the 
23   possibility of offering to organizations the alternative 
24   of submitting the existing form for the first quarter of 
25   2005 with the implementation of this in the second 
0163
 1   quarter of 2005.  I don't -- I don't know about that.  
 2   That's research that we'll have to do on our end, but I 
 3   would encourage the work group to consider all the 
 4   alternatives. 
 5                 MS. SHANKLE:  Well, I would like to 
 6   understand.  You don't particularly have a problem with 
 7   the quarterly report itself.  You have a problem with 
 8   Schedule A and Schedule B.  Is that correct? 
 9                 MR. FENOGLIO:  You did a pretty good job 
10   of cross-examining me, but I'm not comfortable with 
11   that.  No.  I'll answer your question.  I do want to 
12   talk, and I don't know that we want to talk now.  I'll 
13   talk loudly.  Yes.  I'm okay -- we're okay, I think, 
14   with -- and I'm looking for other people in the room to 
15   weigh in.  The form itself, I don't see that as a 
16   problem. 
17                 There is a timing because some -- as 
18   Sharon talked about -- and before we digress, I think we 
19   ought to talk more about her internal conversion.  And 
20   David Heinlein, I think, is still here, and I think he 
21   has some of the same concerns.  So as far -- and I've 
22   not talked to David about this.  I did forward it to him 
23   several weeks ago. 
24                 But in theory, no, I don't have a problem, 
25   and I don't have problems with the way -- and, of 
0164
 1   course, I'm not a bookkeeper.  I only advise the clients 
 2   on that.  But I don't see the form itself as creating 
 3   insurmountable problems for charities like the Schedule 
 4   A or Schedule B does.  Did I answer your question? 
 5                 MS. SHANKLE:  Yes, you did.
 6                 MR. FENOGLIO:  Good.  Darn.
 7                 MR. MANIO:  Steve, I just need some 
 8   clarification on the timing problem that you mentioned.  
 9   Here's my understanding:  The unit transfers the fund 
10   from the unit bingo account to the organization. 
11                 MR. FENOGLIO:  Yes.
12                 MR. MANIO:  And it may go to the bingo 
13   account or general fund.  So the unit will report that 
14   in Schedule B, the top section, as amount transferred 
15   from the unit bingo account to the organization.  And my 
16   understanding of your concern is when the -- when -- at 
17   the end of the quarter, the unit member would have to 
18   file a quarterly report, and then you're saying that it 
19   will not be able to show the itemized listings of 
20   charitable distributions.
21                 MR. FENOGLIO:  Well, Mario, on that same 
22   Schedule B that you're talking about for the unit, as I 
23   understand the question and answer before, the second 
24   part of the second page of Schedule A or B, whatever it 
25   is -- I guess it's Schedule A -- I'm sorry -- Schedule B 
0165
 1   would then have -- correct me if I'm wrong, Tom -- then 
 2   the Arc as the recipient -- let's say the unit -- River 
 3   City Bingo unit trust cuts a $12,000 check for the 
 4   quarter to the Arc.  Then the Arc is going to on the 
 5   second part of that as Code 1 their -- no? 
 6                 MR. LIECK:  No.  The Schedule B is -- the 
 7   amount transferred to the unit member would be at the 
 8   top part.
 9                 MR. FENOGLIO:  Correct.
10                 MR. LIECK:  The bottom part of Schedule B 
11   only -- is used only if the organization says, "Send my 
12   donation to Charity ABC.  Don't give it to my general 
13   account.  Write it directly out of the unit account."  
14   That's the only time anything would be listed in the 
15   bottom half.
16                 MR. FENOGLIO:  I didn't get that idea, and 
17   I think maybe the instruction may need to be worked on, 
18   but -- so in that hypothetical then the Arc as the 
19   recipient of 12,000 in its general fund, does it then 
20   file a quarterly report on Schedule A? 
21                 MR. LIECK:  Correct.
22                 MR. FENOGLIO:  Then that's the answer, 
23   Mario.  The Schedule B doesn't raise the issue.  It's 
24   then Arc has the duty to file the Schedule A and show 
25   that same data that it may not have spent because it 
0166
 1   just got the check the same week that the quarterly 
 2   report is due.
 3                 MR. MANIO:  Okay.  That's fine.  But, now, 
 4   if you take a look at the unit member quarterly report, 
 5   then it would reflect the amount that was received by 
 6   the organization from the unit. 
 7                 MR. FENOGLIO:  I'm sorry.  Let me find the 
 8   report you're referring to.
 9                 MR. MANIO:  Texas Bingo Unit Member's 
10   Quarterly Report.
11                 MR. FENOGLIO:  Okay.  All right.
12                 MR. MANIO:  So now the amount from the 
13   unit -- that came from the unit would be shown in the 
14   upper part in here --
15                 MR. FENOGLIO:  In item 1.
16                 MR. MANIO:  If no distributions are made 
17   from the general fund, then that money that it got from 
18   the unit would only show as undistributed proceeds, and 
19   you may -- it may be distributed the following quarter.  
20   So the timing problem in here, as I see it, is at the 
21   end of the year when the organization has to meet the 35 
22   percent requirement. 
23                 MR. FENOGLIO:  Okay.  So the hypothetical 
24   then would be Arc's got 12,000.  It's already spent ten.  
25   It hasn't spent two.  So it lists the two as 
0167
 1   undistributed on line 2.
 2                 MR. MANIO:  Uh-huh.
 3                 MR. FENOGLIO:  And then the next quarter 
 4   it carries that two to the -- that quarter and reports 
 5   it --
 6                 MR. MANIO:  Report it as a distribution in 
 7   the next quarter.
 8                 MR. FENOGLIO:  -- which is not what they 
 9   had to do before, which, again, I think is another 
10   argument for delaying this implementation because I can 
11   see a lot of charities getting confused about, "Gee, I 
12   forgot about the last quarter carrying some money and 
13   telling you now in this quarter how we spent it."  But 
14   in any event, we still have to tell them either in the 
15   current quarter or the next quarter how we spent money 
16   that we either, A, just received -- we didn't -- or we 
17   have to remember in the second quarter to tell you how 
18   we spent money from the previous quarter.
19                 MR. MANIO:  Uh-huh.  Okay.  Which leads me 
20   to my next -- to the next clarification that I would 
21   like to get from Sharon.  And I think you mentioned that 
22   when money is paid out to the general account, that's 
23   the end for you -- I mean, of your services.  Do -- am I 
24   right in that? 
25                 MS. IVES:  That is correct.
0168
 1                 MR. MANIO:  Who files the quarterly 
 2   reports for those organizations? 
 3                 MS. IVES:  My office does.
 4                 MR. MANIO:  And how did you do that in the 
 5   past?  Just a lump sum without -- the charitable 
 6   distribution I mean. 
 7                 MS. IVES:  Mario, I know how much charity 
 8   money that they received because I'm the one that would 
 9   cut the check.
10                 MR. MANIO:  Right.  Okay.
11                 MS. IVES:  Every quarter that amount would 
12   be noted on their quarterly report.  But once -- say I 
13   wrote a check out to the volunteer fire department.  
14   They got -- they received $5,000 that quarter.  Once the 
15   fire department received that check, I have no idea -- 
16   as a bookkeeper at Fort Worth Bookkeeping, I have no 
17   idea how they spent that money --
18                 MR. MANIO:  Okay.
19                 MS. IVES:  -- so therefore I would not be 
20   able to complete this form.
21                 MR. MANIO:  All right.  Then the next 
22   question would be, what you're doing is you're assuming 
23   that once the money is paid out of the unit -- of the 
24   bingo account, then you have considered that whole 
25   amount as a charitable distribution.
0169
 1                 MS. IVES:  That is correct.
 2                 MR. MANIO:  And that would be true for 
 3   501(c)(3) if my understanding is correct.  But for 
 4   501(c)(9)'s, that's probably not going to be true.
 5                 MR. FENOGLIO:  Well, and technically it 
 6   wouldn't be a true necessarily for a 501(c)(3).  Let's 
 7   say it's the Steve Fenoglio Feel Good Trust and I have 
 8   actually a 501(c)(3) designation from the IRS, and I 
 9   actually use it instead of for whatever authorized 
10   purposes the IRS recognized, I threw a beer bash.  
11   Well -- and I use bingo money to do it.  You see the 
12   point -- I mean, just because -- I mean, a 501(c)(3) is 
13   not sacrosanct in the sense that because they're a 
14   (c)(3) they get a pass from any scrutiny.  They still 
15   are subject to audits, and on occasion they are -- the 
16   auditors will challenge expenditures that a (c)(3) made 
17   and seek to deny the use of bingo funds within the ambit 
18   of the Bingo Enabling Act.  I don't want anyone to think 
19   that just -- if you have a (c)(3) you're taboo.
20                 MR. MANIO:  Yes.  I understand.  Yes.
21                 MR. FENOGLIO:  So you'd still have to -- 
22   but in the current scenario for Sharon, she files a 
23   report for the (c)(3), she certifies that they received 
24   $5,000.  That's it.  Report is filed.  And if there's 
25   ever a question about it, she can be called as a 
0170
 1   witness.  She can be sworn under oath and say, 
 2   "Ms. Ives, did -- are all these numbers true and 
 3   correct?"  "Yes, they are."  "Well, are you aware that 
 4   the Fenoglio Feel Good Trust actually spent the 5,000 on 
 5   a beer bash?"  "No, I wasn't, and under the quarterly 
 6   current report I haven't certified that."  In this 
 7   report I think what they're trying to get to is she's 
 8   going to certify that those funds were used for an 
 9   honorable -- as I read it now, authorized purpose, so, 
10   you know, at some point she may be set up for a fall.  
11   And I think that's an important substantive difference 
12   in the current practice and the practice they're going 
13   to today.
14                 MR. MANIO:  Okay.  Thanks for the 
15   clarification.  I think I have a better understanding of 
16   what you're facing now.  I mentioned that we can't 
17   answer these questions today, you know, really.
18                 MR. ATKINS:  No, I don't think we can 
19   answer them today, but I'm sure that we can work towards 
20   a resolution. 
21                 Let me see if I can clarify something you 
22   were saying, Steve, about what Sharon does now.  Sharon 
23   signs the quarterly report? 
24                 MS. IVES:  No.  My office staff does.
25                 MR. ATKINS:  Okay.
0171
 1                 MR. FENOGLIO:  I think David -- David, do 
 2   you sign quarterly reports?
 3                 MR. HEINLEIN:  Only on those that I'm a 
 4   designated agent. 
 5                 MR. FENOGLIO:  As what?  David Heinlein --
 6                 MR. HEINLEIN:  I do not sign -- I do not 
 7   sign any quarterly reports for individual charities.  
 8   They sign their own report. 
 9                 MR. ATKINS:  That's what I mean.  If 
10   there's information on the report that's wrong, it's the 
11   charity that's held responsible for it regardless of who 
12   filled it out or completed it. 
13                 MS. IVES:  That is correct. 
14                 MR. FENOGLIO:  Well, the certification is, 
15   "I declare that the information in this document is true 
16   and correct to the best of my knowledge and belief," and 
17   so if Sharon is now -- and I'm assuming someone in the 
18   general counsel's office would argue that it not only 
19   includes the report but the Schedule A to the report.  
20   And maybe I'm incorrect, and this may be a discussion we 
21   have later, Billy.  But if that's the case, then you're 
22   now requiring her to certify how this charity spent 
23   its -- which in the -- proceeds, which in the past has 
24   not been a part of the form, and that's -- that's, you 
25   know, perhaps, Billy, the law of unintended 
0172
 1   consequences, but it is what it is, and that's a concern 
 2   we have.  And, again, I think there's enough creative 
 3   talent and energy that we can get to a great deal of 
 4   understanding and agreement on this -- 
 5                 MR. ATKINS:  I'm sure we can.
 6                 MR. FENOGLIO:  -- with the format that 
 7   you've suggested and I've requested.
 8                 MR. MANIO:  I have another question.  May 
 9   I direct this question to Sharon again? 
10                 MS. IVES:  Yeah.
11                 MR. MANIO:  Assuming that you have access 
12   to the general funds of your organization, how much 
13   trouble would it be to classify those distributions 
14   according -- you know, into these categories?  Is it 
15   going to be --
16                 MS. IVES:  Well, Mario, basically that's 
17   what the auditors do right now.  Whenever they notify 
18   the organization that there's going to be an audit, they 
19   request the four quarters as well as the general fund 
20   records, and that's what the bingo auditors do right now 
21   is they trace the money, the checks that go from the 
22   bingo checking account or the unit checking account to 
23   the general fund.  That's what the auditors track.  And 
24   also with the audit notice you receive the schedule that 
25   the charity representative will fill out on what they -- 
0173
 1   you know, how they spent that money during that year, 
 2   which is during that audit period.  You know, they -- 
 3   they take care of that, but that's -- you know, like I 
 4   said, that's only during an audit request.
 5                 MR. MANIO:  Okay.  Thank you. 
 6                 MS. IVES:  Did that answer your question?
 7                 MR. MANIO:  Yes. 
 8                 MS. SHANKLE:  I want to go back to the 
 9   quarterly report.  When this was being designed, we went 
10   by Section 401 -- 458 of the Bingo Enabling Act that 
11   gives us all the allowable expenses.  Not every expense 
12   that you have is going to be allowable, and in the audit 
13   that's why there's money that is disallowed.  So if it 
14   doesn't fit into a category, then it's not going to fit.  
15   So it has to fit in here or it's not allowable.
16                 MR. FENOGLIO:  Well, I don't want to get 
17   into harsh words like President Clinton did and say the 
18   definition -- it depends on what your definition of "is" 
19   is, but the statute says, "An item of expense may not be 
20   incurred or paid in connection with the conduct of bingo 
21   except an expense that is reasonable and necessary to 
22   conduct bingo."  So stop right there.  If it's 
23   reasonable and necessary to conduct bingo, I believe 
24   it's an authorized expense. 
25                 And then the sentence in 458(a) goes on to 
0174
 1   say, "including an expense for," and there are 11 
 2   discrete items.  So you focus on the word "including," 
 3   and I believe the word "including" is not the exhaustive 
 4   list but is used in its ordinary terms, the word 
 5   "including."  It's not a defined term in the Bingo 
 6   Enabling Act, nor is it a defined term in the 
 7   Administrative Procedures Act.  And it's used in the 
 8   way -- as way -- by way of example an expense for. 
 9                 I don't want to have that discussion here 
10   today.  I really don't.  But I think that when y'all try 
11   to then say, well, all of these have to be shoehorned 
12   into this, my initial reaction was that's still not the 
13   law.  But I can wait and have that discussion later.  
14   But then I see that insufficient fund issue, and I 
15   can -- I can go back to the office and find 20 or 50 
16   audits where y'all disallowed insufficient funds, but on 
17   the back of this -- one of these sheets it suggests 
18   otherwise.  And, again, Billy, I don't know that we need 
19   to resolve that issue today, but it just -- it piqued 
20   the heck out of my interest, banks and -- "bank fees and 
21   cash (over)/short." 
22                 MR. LIECK:  The bank fees, we're talking 
23   about the fees the bank charged, not the face amount of 
24   the -- (inaudible).  We're talking about the service 
25   charges, the charges that the bank had for you 
0175
 1   maintaining the account. 
 2                 THE REPORTER:  I'm sorry.  I couldn't hear 
 3   you.  Sorry, Tom.  I couldn't hear you.  You might have 
 4   to repeat that.
 5                 MR. LIECK:  All right.  What that refers 
 6   to is the bank charges that the bank charges the 
 7   organization.  It's not the returned checks, the amount 
 8   of that.  It's the service charge for maintaining the 
 9   account or the service charge for the check bouncing, 
10   but it's not the face amount.
11                 MR. MANIO:  May I make a suggestion about 
12   these items again?  When -- when this -- these items 
13   were formulated, the source really of the information is 
14   the section in the rule pertaining to net proceeds 
15   because that is where the allowable exceptions are 
16   itemized.  So what I think we can do for, you know -- is 
17   double -- double-check these items against the rules in 
18   that section, net proceeds, allowable expenses.
19                 CHAIR TAYLOR:  Two things.  I think if 
20   you're going to add one more thing being other necessary 
21   expenses, I would think that office supplies, the paper 
22   clips, copies, all that could have a line on here 
23   somewhere. 
24                 MS. SHANKLE:  I believe that's in the 
25   instructions for --
0176
 1                 MR. LIECK:  On No. 28 it was added to the 
 2   instructions. 
 3                 CHAIR TAYLOR:  Yeah.  But what I'm saying 
 4   is it truly doesn't -- I think it skews that number 
 5   because it's not any of those items.  It's not -- having 
 6   paper clips and rubber bands isn't anything to do with 
 7   the accounting cost of bingo.  But the other thing, 
 8   going back to this schedule, I think -- I understand, 
 9   like Steve has said, the reason the Lottery Commission 
10   is looking for this information is so that legislatively 
11   we can give better information to the legislators about 
12   where the money is going.  Instead of this being on a 
13   quarterly basis, I think that every charity runs a 
14   general journal at the end of the year.  And if this was 
15   something that's due like April of the year following 
16   the bingo year,  I think you would still capture that 
17   information.  The money would have been spent.  It would 
18   be very easy to send off one form that shows the 
19   expenses. 
20                 Anyway, just my personal opinion that 
21   you'd get the same information, and David Heinlein is 
22   asking to talk. 
23                 MS. SHANKLE:  I'll give up my chair, 
24   David. 
25                 MR. SMITH:  Just one quick thing here.  
0177
 1   Just one quick thing I wanted to point out.  This is in 
 2   reference to charity costs on the Schedule A.  If a 
 3   bookkeeper, say, like Sharon has to go back into our 
 4   general account to find where we made all our 
 5   distributions to our local charities that we donate to 
 6   and the needy families that we donate to and the food 
 7   banks that we donate to, bookkeepers and CPA's generally 
 8   charge by the page or by the -- by the job, and going 
 9   into a general account creates a whole new barrel of 
10   monkeys to open up.  That's going to significantly -- 
11   significantly increase your cost to the charities.  
12   That's something that we really need to consider on this 
13   Schedule A.  And we're probably going to need some more 
14   time, like you said, to get our computer systems for our 
15   quarterly reports changed over, also.  David?  
16                 MR. HEINLEIN:  David Heinlein.  Oh, wow.  
17   I didn't know we were getting into something like this 
18   today.  We certainly have to track charitable 
19   distributions, and we do this in a very good way.  The 
20   way that we're doing it now works very, very well. 
21                 The test of the 35 percent rule that we 
22   must make right now is easily definable by the way we 
23   currently report charitable donations each quarter.  If 
24   the charity is required to donate $5,000 this quarter 
25   and that line item when we send that quarterly report 
0178
 1   says $5,001, they have met that 35 percent rule.  Test 
 2   done. 
 3                 Now, to go the next step to find out what 
 4   did they actually do with that $5,000, that's a 
 5   completely separate issue, and I think it should be 
 6   addressed on a separate form, a separate request.  I 
 7   don't think it can possibly be integrated into the same 
 8   quarterly report.  It's going -- it -- it's not going to 
 9   make it possible to define it because that $5,000 might 
10   get used a year from now.  You don't know when it's 
11   going to be used. 
12                 They may have an accumulation.  I have one 
13   that they're accumulating money for some particular 
14   scholarship fund, and until they get it to $15,000, it 
15   will all just sit there.  It might be there for two 
16   years depending upon how much they appropriate to that 
17   particular account. 
18                 Now, one thing that they can do, though, 
19   is give you information, but it's not going to balance 
20   to that 35 percent rule.  If you're going to try to 
21   balance to that, you're not going to be able to do it.  
22   But if you want to know what they actually did with the 
23   money that was used for charitable purposes, do that 
24   once a year and ask them to give you a copy of their 
25   990. 
0179
 1                 I mean -- now, they don't get that on a 
 2   tentative basis, depending upon how they've done 
 3   theirs -- and I find many of them -- you know, we just 
 4   met another deadline Monday, November the 15th.  That's 
 5   for the year 2003.  So that's 11 months later that 
 6   you're being -- you're filing a report to the IRS that 
 7   tells them what you did with the money.  And I mean it's 
 8   a very detailed report if you've ever filled one of 
 9   those out.  They're a mess.  But to do that, that's 
10   giving you the exact information of what actually 
11   happened to the money. 
12                 And if you want to know what happened to 
13   the money, I think that's a good source to find that 
14   out.  But the person that's doing the bookkeeping on the 
15   bingo activities, they're not going to know that, and I 
16   don't think there's any way they can integrate that into 
17   their system, not in a timely way, and cause that to 
18   happen on these time periods that are certain. 
19                 We do that with the way that we spend 
20   money that we pay the authorized expenses.  That's not a 
21   problem.  We can do that.  But we send that money out of 
22   that bingo account to meet that 35 percent rule every 
23   quarter, and it goes to that charity's general fund, and 
24   we're done.  Like Sharon said, that's all that we'll 
25   know about it.  We won't know what they actually do with 
0180
 1   it unless we're doing their 990's.  And when we're doing 
 2   their 990's, then we, of course, know what actually 
 3   happened to the money, and that can be a separate 
 4   report, but I don't think you're going to get it on 
 5   this.  There's no way I could certify what they did with 
 6   their money on October the 25th or April the 25th.  It's 
 7   impossible to get that kind of information because they 
 8   don't know what they did with it because they haven't 
 9   done anything with it yet.  This needs some work. 
10                 MR. ATKINS:  Good.  We look forward to 
11   your help, David.  Thanks for volunteering.
12                 MR. HEINLEIN:  I really wanted to be 
13   quiet.
14                 MR. MOORE:  Madam Chair, I need to excuse 
15   myself.  I've got a conflict this evening.  We still got 
16   a quorum, right?
17                 MR. ATKINS:  Yeah.
18                 CHAIR TAYLOR:  Okay.  That would be fine.
19                 MR. CORNWELL:  One last comment. 
20                 CHAIR TAYLOR:  Come on up.
21                 MR. CORNWELL:  My name is Knowles Cornwell 
22   with Good Time Bingo.  I am a CPA -- retired CPA, and I 
23   got a suggestion for your reporting requirement that 
24   might and might not work.  Each one of the categories 
25   within the 501(c) -- now, we've got volunteer fire 
0181
 1   departments that don't -- a lot of them don't follow 
 2   under -- have not got their certifications. 
 3                 But can we not for legislative purposes be 
 4   able to sit down and say, Column 1 is 501(c)(3)'s, 
 5   Column 2 is (4)'s, Column -- six, ten -- nine, ten -- 
 6   19, and would that give us enough information to know 
 7   what charge or what specific charitable purpose these 
 8   people have done without sitting down and finding out 
 9   how much they spent on paper clips versus food bank 
10   contributions?  Is that something that legislature -- is 
11   that good enough information?  Is that all the 
12   information we're going to get anyway?  Would that help? 
13                 Or do we just put it on the front of the 
14   form what kind of organization it is and let the Lottery 
15   Commission, without having detailed check numbers unless 
16   it's an audit trail type of schedule, is this something 
17   that could work and make it a lot easier and accomplish 
18   all the purposes we're trying to do and give -- we need 
19   good information to be convincing in front of the 
20   legislature, you know, so I don't know.  That was just a 
21   comment and question. 
22                 CHAIR TAYLOR:  Any other comments from the 
23   group?  Mario, it's my understanding the group is going 
24   to meet again and continue to work on this?
25                 MR. MANIO:  Yes.  We have to decide -- did 
0182
 1   you want to -- did you have a date in mind or -- Steve 
 2   or Terry, or is this something that we can agree later 
 3   on or -- 
 4                 MS. SHANKLE:  Let's make it -- we'll get 
 5   together after this.
 6                 MR. MANIO:  Okay.  We'll make a decision 
 7   on the meeting date at the end of the meeting.
 8                 CHAIR TAYLOR:  Okay.  No other discussion?  
 9   Okay.  Agenda Item 11.
10                 THE REPORTER:  Can we take a break?
11                 CHAIR TAYLOR:  We sure can.  We're going 
12   to take a ten-minute break.  We'll meet back here at 25 
13   after.
14                 (Break taken.)
15                 CHAIR TAYLOR:  Okay.  We have our quorum 
16   back here, so we would like to call the meeting back to 
17   order.  We are on Item No. 12?  No, 11.  I'm sorry.  11 
18   was "Report and possible discussion by the Bingo 
19   Advisory Committee work group on the review of the 
20   Operations Manual."
21                 MR. MANIO:  That's me again.  Before I 
22   turn the floor over to Marshall, let me just make a few 
23   remarks about the operations manual.  And the members of 
24   this committee are Jody Mefaffey out of the regional 
25   office in Dallas of the Lottery Commission, 
0183
 1   Marshall McDade, myself, and Pete Pavlovsky who is 
 2   leaving his post for medical reasons. 
 3                 The rationale for the Bingo Operations 
 4   Manual, the last one that was available was printed in 
 5   1992, so this a 12-year-old document.  The primary 
 6   audience for the operations manual are the operators, 
 7   conductors.  The secondary audience would be the bingo 
 8   workers.  And the operations manual is intended to be a 
 9   handbook on how to conduct bingo, what to do and what 
10   not to do, what is compliant and what is not compliant. 
11                 Now, the old manual has about 50 pages of 
12   text, and the revised manual will probably be of the 
13   same size, but the new one will be updated with changes 
14   in the Bingo Enabling Act.  The second part of the bingo 
15   manual are all of the forms that are available from the 
16   Lottery Commission, and those forms, again, will be 
17   updated and be made part of the new and updated Bingo 
18   Operations Manual.  And with that, Marshall. 
19                 MR. McDADE:  Again, I'm Marshall McDade, 
20   Senior Audit Manager, Charitable Bingo Operations 
21   Division.  There's not much more that I can add to what 
22   Mario has stated.  We've met a -- as a group met a 
23   couple of times, both September 8th and October 18th, to 
24   go over various drafts of the operations manual, and as 
25   Mario indicated, we're trying to produce a manual that 
0184
 1   the organizations can use on a day-to-day basis to 
 2   answer questions, provide an easier -- provide them with 
 3   an easier understanding of the bingo act and the rules 
 4   so that they can better operate or more effectively 
 5   operate their bingo operations. 
 6                 So the next step in this process will be 
 7   for us to work with our legal division for -- to have 
 8   them review the operations -- draft of the operations 
 9   manual and then bring it back before this group at a 
10   later date to get more -- we're going to have additional 
11   meetings to have more input to make sure that what we're 
12   including in this manual will be something that will be 
13   usable by our conductors.  So that's all that I have for 
14   right now.  If anyone has any questions --
15                 CHAIR TAYLOR:  Are there any other 
16   comments?
17                 MR. PETERS:  Just a question.  When will 
18   this be available for public review? 
19                 MR. ATKINS:  Could you come up and 
20   identify yourself?
21                 MR. PETERS:  I'm sorry.  I'm Darin Peters 
22   with Good Time Action Games.  When will this be 
23   available for public comment or view, or is that as soon 
24   as you're done discussing it here?
25                 MR. McDADE:  Once our legal division has 
0185
 1   had an opportunity to review and make comment and tell 
 2   us, "You can't do this," "You can't do that," then we 
 3   will seek -- get with the work group and kind of figure 
 4   out when we can make it available to the public.  I 
 5   can't give you a specific date right now because our 
 6   legal division hasn't received it yet, so they haven't 
 7   had a chance to review it. 
 8                 MR. PETERS:  Thank you.
 9                 MR. MANIO:  Yes.  And this is the very 
10   early stages of developing the new handbook.  We've only 
11   met a couple of times, and we may have to meet one more 
12   time to complete the document before sending it to the 
13   legal services. 
14                 CHAIR TAYLOR:  Any other comment?  Then 
15   we'll go on to Item No. 13, "Public comment."  Does Good 
16   Time Bingo have any public comment?
17                 MR. CORNWELL:  No, ma'am.
18                 CHAIR TAYLOR:  Being no public comment, 
19   we'll go on to Item 14, "Consideration of and possible 
20   action on future Bingo Advisory Committee meeting dates 
21   and/or items to be recommended to the Commission for 
22   consideration at a future Bingo Advisory Committee 
23   meeting." 
24                 Anything in particular that the committee 
25   would like on this agenda that isn't one of the items 
0186
 1   that we have under each time? 
 2                 MR. DOUGHERTY:  Well, I can offer a date.  
 3   We generally meet about every three months, so why don't 
 4   we set it up -- or discuss it for February the 16th, 
 5   which is the third Wednesday in February, and see if 
 6   that's agreeable to everybody.
 7                 CHAIR TAYLOR:  Is that agreeable? 
 8                 MR. DOUGHERTY:  Will that allow enough 
 9   time for work groups?
10                 MS. ROGERS:  I have a question.  Would we 
11   not want to do it before the terms expire?  So that 
12   would be February 1st, so we back it up maybe in the 
13   latter part of January?  Because --
14                 MR. DOUGHERTY:  You mean to get one last 
15   attendance by these outgoing members?
16                 MS. ROGERS:  Yes, sir, because they are on 
17   a lot of the work committees.
18                 MR. ATKINS:  Well, let me point out, they 
19   serve until their successor is named.
20                 MS. ROGERS:  Oh.
21                 MR. ATKINS:  If Peter or anybody is 
22   thinking that they're just going to --
23                 MR. WHITTINGTON:  Walk away?
24                 MR. ATKINS:  Yeah.
25                 MR. MANIO:  One comment about that.  Even 
0187
 1   if there is a successor by the 1st of February, I will 
 2   still -- I am still committed to attend the next meeting 
 3   just to make a report on the work groups that I'm 
 4   working with.
 5                 CHAIR TAYLOR:  Thanks, Mario.  We're not 
 6   going to name a successor. 
 7                 MR. SANDERSON:  I was going to -- Phil 
 8   Sanderson, for the record.  I was going to -- while 
 9   you're looking at a date, legislative session starts, 
10   what, January the 10th, 14th, somewhere in there.  And 
11   if y'all wait too late in February, to me you may not 
12   have time to get anything together that y'all would like 
13   to have for that. 
14                 MR. WHITTINGTON:  I think it should be the 
15   last Wednesday in January. 
16                 MR. DOUGHERTY:  Well, Phil, last year we 
17   didn't have any significant suggestion to the 
18   legislature.  I don't know how that's going to interface 
19   with our meeting. 
20                 CHAIR TAYLOR:  Well, hopefully this year 
21   there will be some new items, and the BAC can at least 
22   lay down whether they are in agreement or disagreement 
23   with legislative issues, can they not?  We did that 
24   previously where the BAC, you know, agrees with the 
25   legislative -- what am I trying to say -- the rules, the 
0188
 1   law, the new proposals, that we did or did not agree 
 2   with them. 
 3                 MR. ATKINS:  I don't know if I remember 
 4   that.  I remember them commenting on the recommendations 
 5   from the Sunset Commission. 
 6                 MR. FENOGLIO:  Well, actually -- for the 
 7   record, Stephen Fenoglio.  The Bingo Advisory Committee 
 8   did take a position on what we loosely call the 
 9   "positive agenda" and favorably recommended that, both 
10   within the context of the Sunset but also independent of 
11   that, and I think that decision we obtained in November 
12   time frame.  We actually have a lengthy program already 
13   developed.  In light of the comments by both Chairman 
14   Clowe and Commissioner Cox, I anticipate there will be 
15   other discussions.  But I can tell you, Billy, that this 
16   committee did vote favorably to endorse the positive 
17   agenda.
18                 MR. ATKINS:  But I was talking about 
19   individual pieces of legislation.
20                 MR. FENOGLIO:  Well -- 
21                 CHAIR TAYLOR:  We did vote, too, to agree 
22   with the progressive bingo.  I remember that we voted to 
23   agree with that again, so that would have been a piece 
24   of legislation. 
25                 MR. ATKINS:  Okay.  Here's -- here's what 
0189
 1   I'm trying to say.  The advisory committee to my 
 2   recollection never took a list of bills that had been 
 3   filed by -- by, you know, legislators and said, yes, no, 
 4   yes, yes, no.  They were concepts.
 5                 MR. FENOGLIO:  They were concepts, and 
 6   they were detailed concepts, but they were -- you're 
 7   correct.  There weren't as though during the middle of 
 8   the session we had a meeting and said "yes" and "no" on 
 9   those legislative proposals.  But, I mean, for example, 
10   in the progressive bingo the concept that was discussed 
11   at length was the legislative proposal from the previous 
12   session, so -- but, no, it was not House Bill 12, for 
13   example, or what have you. 
14                 And with that in mind, from our 
15   perspective we would like for it to be in late January 
16   or early February at the latest for that same reason of 
17   the legislative session.  Their first day is actually 
18   January 11th.  Typically they don't do a lot of formal 
19   stuff, although there is discussion in the legislature 
20   to make the school finance issue a priority item.  There 
21   is a way to do that, and they actually may get started 
22   on actual legislative activities a lot earlier. 
23                 Typically the first month of the session, 
24   there's not a lot of legislative committee hearings or 
25   legislative development.  It usually gets cranked up in 
0190
 1   late February through really -- well, I guess committee 
 2   meetings are typically March is the heavy lifting 
 3   period.  But I think it would be helpful, especially if 
 4   y'all are talking about a joint meeting with the 
 5   commissioners, which I don't know if that date -- if 
 6   there's been a date discussed, but I think it would 
 7   dovetail nicely with a follow-up meeting.
 8                 MS. ROGERS:  Is it necessary to talk about 
 9   that date now, Billy, or no?
10                 MR. ATKINS:  Talk about which date?
11                 MS. ROGERS:  For the joint -- with the 
12   commissioners, or no?  Is that something we --
13                 MR. ATKINS:  I'll just tell you right now, 
14   it's hard enough to get a date for those three that I 
15   think it would be better to see if we can get several 
16   dates from them when they'll be available and then 
17   circulate that among the BAC members.
18                 MS. ROGERS:  Well, I think our next 
19   meeting should be more geared towards the middle or end 
20   of January.  That's my personal --
21                 MR. WHITTINGTON:  26th?  Is that 
22   Wednesday, 26th, February 26th?
23                 CHAIR TAYLOR:  Is there a particular day 
24   the commissioners normally meet on? 
25                 MR. ATKINS:  No.
0191
 1                 MS. ROGERS:  Myself, I'm available.
 2                 MR. FENOGLIO:  A weekday. 
 3                 MR. ATKINS:  They've done it on Saturday.
 4                 UNIDENTIFIED SPEAKER:  But they have met 
 5   on a -- was it a Saturday?
 6                 CHAIR TAYLOR:  So I'm hearing that --
 7                 MR. DOUGHERTY:  Which meeting were you 
 8   referring to, the joint?
 9                 MR. WHITTINGTON:  The BAC meeting. 
10                 MR. DOUGHERTY:  Okay.  Thank you.
11                 MR. WHITTINGTON:  Just told he was going 
12   to meet with the commissioners first on the commissioner 
13   stuff.
14                 MR. DOUGHERTY:  Well, then I would suggest 
15   that providing we get this legislative information of 
16   what's being filed, then we should meet January 19th or 
17   26th.  It doesn't matter.  But if we don't have anything 
18   in our hands before then --
19                 MR. FENOGLIO:  You'll have something in 
20   detail.  I mean -- and just so you know, the staff had 
21   been asked for recommendations from Kino Flores, who's 
22   chairman of the House Licensing Administrative 
23   Procedures Committee, and has proposed -- or in response 
24   to that direct question has proposed a list of 
25   discussion items legislatively, some of which we 
0192
 1   enthusiastically endorse and others we haven't had a 
 2   chance to address yet. 
 3                 So there's a -- Jack, there's a lengthy 
 4   list developing.  We've had within the bingo coalition 
 5   that Mr. Bresnen discussed earlier the IBC's and also 
 6   that Billy discussed, that legislative proposal was 
 7   discussed.  It is in -- still in draft form, but in the 
 8   special session that ended in June or May -- May, I 
 9   guess, it was a legislative proposal. 
10                 So there are detailed items that are 
11   available, and I guess I'll send them to Suzanne and let 
12   her distribute within the committee because I don't 
13   think I have BAC -- and we've shared that with staff, 
14   too, so you will have details --
15                 MR. DOUGHERTY:  In view of what you said 
16   then, let's discuss January 19th then.
17                 MS. ROGERS:  That's fine with me, January 
18   19th. 
19                 CHAIR TAYLOR:  I'll make sure to give you 
20   the e-mail addresses of all the BAC members so you can 
21   individually send them those items.
22                 MR. FENOGLIO:  And while you're on the 
23   agenda item, I had circulated earlier to both Billy and 
24   Suzanne two items that our clients would like to have 
25   considered for the next session, one of which is the 
0193
 1   same issue of legislative proposals.  The other is the 
 2   other issue I mentioned earlier in my presentation about 
 3   the recent Bingo Bulletin article and the effect, if 
 4   any, of bingo activity on whether a charity is liable 
 5   for wagering and excise taxes, and it's based on 
 6   information that Lottery received from IRS. 
 7                 And I have not had a chance to talk with 
 8   staff at all in any detail.  I have started my research, 
 9   and it appears as though that's a developing 
10   interpretation from IRS from our perspective.  And, 
11   again, because the statute -- that 26 USC section 
12   doesn't say what that -- or at least I don't think it 
13   says what that memo says, and so my assumption is this 
14   is some sort of developing area on wagering. 
15                 I mean, the wagering tax itself and excise 
16   tax has been on the books for many, many years, and 
17   obviously, I guess, part of this is the impact, if any, 
18   of the new change in Section 2001.454 of the Bingo 
19   Enabling Act, and the use of those proceeds may have 
20   some effect on it. 
21                 MR. ATKINS:  And one -- I guess -- I want 
22   to make sure I'm clear on what you're hoping to 
23   accomplish through the discussion of that item. 
24                 MR. FENOGLIO:  As I indicated, a report 
25   and possible discussions and/or action, if any, on the 
0194
 1   federal wagering excise tax and the occupational tax as 
 2   it relates to charitable bingo.  I think -- I mean, you 
 3   at least have one report.  I don't know if everyone's 
 4   read the Bingo Bulletin.  I mean, that is a report, but 
 5   I've already had probably a dozen calls on that from 
 6   charities who have read it and said, "Do" -- "Are we 
 7   subject to the wagering tax?" 
 8                 And I echo what someone said before, that 
 9   Tom is not the expert.  I think it was you who said it.   
10   I know the agency has taken the position, and rightfully 
11   so, that y'all are not the IRS, and you have no 
12   authority to interpret federal law.  But it does affect 
13   charities, and in that regard that's the concept that I 
14   would like to have it discussed so that these members, 
15   when they go back to their respective communities, can 
16   say, "Well, yes, we've discussed it," and there may be 
17   other information that's available.  I mean, there are 
18   IRS publications on this. 
19                 I'm not suggesting necessarily, Billy -- 
20   I don't think it will be -- that there will a formal 
21   report with, if you will, legal advice or 
22   interpretations provided by the staff or the committee. 
23                 MR. ATKINS:  Okay.
24                 MR. FENOGLIO:  But as we found out, 
25   sometimes the UBD issue, surprises unrelated to this 
0195
 1   income tax, can surprise a charity.  So if they're aware 
 2   of it, then at least they can go talk to a CPA or a tax 
 3   advisor and say, "Does this affect us?"  And I think 
 4   that's the context of which y'all were providing that 
 5   information.  
 6                 MR. ATKINS:  Right. 
 7                 CHAIR TAYLOR:  The tentative date for the 
 8   meeting is going to be the 26th?  Is that the pleasure 
 9   of the committee? 
10                 MR. WHITTINGTON:  Or the 19th.
11                 MS. ROGERS:  Or the 19th.
12                 MR. DOUGHERTY:  Either the 19th or the 
13   26th.  Seems like the 26th sort of pushes it too far in 
14   view of the departing members.
15                 MR. FENOGLIO:  The only thing that I would 
16   observe is -- and I don't know if the commissioners were 
17   talking about possibly meeting with the BAC in December, 
18   and if not, then January they typically will meet the 
19   first two weeks of January, if memory serves correct.  
20   They usually meet around the third or second week of 
21   December.  So if you don't meet in December with them, 
22   it might be helpful to have had the meeting with them 
23   first so y'all get input and direction from them and 
24   vice versa.  That may require y'all to come to Austin 
25   twice in January, by the way, so it may be better that 
0196
 1   the 26th is a better date because it gives you more 
 2   time. 
 3                 MR. DOUGHERTY:  You think the Commission 
 4   will meet about January the 5th, like a Wednesday or a 
 5   Tuesday?
 6                 MR. FENOGLIO:  I think -- if my memory -- 
 7   I mean, it's hard to predict because they do have three 
 8   schedules, but they've -- I can only remember once that 
 9   they met after the 20th of December until the holiday 
10   season ends.  So if that's a guide, then they're 
11   probably not going to meet until sometime between the 
12   5th and the 15th.  Again, that's speculation. 
13                 MR. ATKINS:  Yeah.  For clarification 
14   purposes, I don't know, again, since it's hard enough to 
15   get a date for the three commissioners, that, like Steve 
16   said, we should be focusing on the joint meeting right 
17   now but be focusing more on the next regular meeting.  
18   And, as Steve said, it may require that there be two 
19   meetings fairly close together, one with the Lottery 
20   Commission and one with the -- with the -- with just the 
21   BAC.  You know, in terms of, you know, what day in 
22   January for the BAC to meet, that's -- I think it's 
23   purely up to the committee.
24                 MS. ROGERS:  Well, the 26th would give us 
25   more time to hopefully get the joint meeting, so --
0197
 1                 CHAIR TAYLOR:  Well, it's not set in 
 2   stone, so for now we'll say the 26th, and it can be 
 3   changed. 
 4                 MR. DOUGHERTY:  26th. 
 5                 CHAIR TAYLOR:  We have some of the items 
 6   that we continue to discuss today, the operations 
 7   manual, the new rules, our legislative issues, the 
 8   article in Bingo Bugle, so we know those items will be 
 9   on the next agenda.  So if there's additional items you 
10   want to see on it, if you could e-mail them to myself or 
11   Billy -- is that okay? 
12                 MR. ATKINS:  Uh-huh.
13                 CHAIR TAYLOR:  -- to myself or Billy, then 
14   we'll make sure that they get on the next agenda.  Is 
15   there any other discussion on this topic? 
16                 MR. FENOGLIO:  And, Madam Chair, while 
17   we're on it in relation to that, during the break the 
18   working group of this quarterly report form discussed -- 
19   and it was December 8, I believe -- it was 6th -- 
20   December 6th at 10:00 o'clock in Austin, and if anyone 
21   wants to be a participant who's not already -- Mario and 
22   obviously you as the chair are a member and I guess 
23   Kimberly are a member of that.  And we've talked with 
24   staff, and I've talked with some other people who would 
25   like to -- just so you know, so that would also dovetail 
0198
 1   a report in January.  Thank you. 
 2                 CHAIR TAYLOR:  Anything else?  Then this 
 3   meeting is adjourned. 
 4                 (Meeting adjourned at 3:48 p.m.)
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0199
 1                        AMENDMENT SHEET
 2     BINGO ADVISORY COMMITTEE MEETING - NOVEMBER 17, 2004
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0200
 1                   REPORTER'S CERTIFICATION
 2   
 3   STATE OF TEXAS   )
 4   COUNTY OF TRAVIS )
 5   
 6       I, GINA S. VERDUZCO, Certified Shorthand Reporter 
 7   for the State of Texas, do hereby certify that the 
 8   above-captioned matter came on for hearing before the 
 9   TEXAS LOTTERY COMMISSION CHARITABLE BINGO DIVISION as 
10   hereinafter set out, that I did, in shorthand, report 
11   said proceedings, and that the above and foregoing 
12   typewritten pages contain a full, true, and correct 
13   computer-aided transcription of my shorthand notes taken 
14   on said occasion.
15       Witness my hand on this the 3RD day of DECEMBER, 
16   2004.
17   
18   
19                      ____________________________________
                        Gina S. Verduzco, Texas CSR 3892
20                      Expiration Date: 12/31/05
                        Wright Watson STEN-TEL
21                      Registration No. 225
                        1801 North Lamar Blvd.
22                      Mezzanine Level
                        Austin, Texas 78701
23                      (512) 474-4363
24   
25   JOB NO. 04117GSV