Summary of Report 06-032

April 2006

Report Number 06-032

The Parks and Wildlife Department (Department) has established an effective process for collecting revenue from the sale of hunting and fishing licenses. In license year 2005, the Department collected $87 million in revenue from the sale of 2.7 million licenses and related items such as stamps, tags, and permits. That amount represents substantially all of the revenue that should have been collected, subject to the limitations discussed below. The Department's controls also ensure that its processes to collect all applicable revenue from boat registration and titling fees and taxes are adequate. The Department collected $22 million in revenue from these sources in fiscal year 2005.

An additional $502,446 could have been collected if all non-Texas residents had paid the proper out-of-state license fees and if only individuals who were eligible for reduced license fees because of their age paid the reduced fees.

Results of audit tests of a sample of license fees indicated those fees were collected in a adequate and timely manner, but the Department should independently verify that license fee revenue has been collected from all active license agents (such as retailers) that sell licenses on its behalf.

The Department should ensure that license applicants provide Social Security numbers.

The Department generally administers the Game, Fish, and Water Safety Account (Fund 009) in accordance with the applicable laws and regulations that auditors tested, but it should comply with all state and federal laws. For example, the Department should ensure that individuals provide Social Security numbers when they purchase hunting and fishing licenses as required by Texas Family Code, Section 231.302, and Title 42, United States Code, Chapter 666. During license year 2005, 1,088,339 (51.18 percent) of the 2,126,501 people who applied for a license did not provide a Social Security number, provided an incomplete or invalid Social Security number, or provided Social Security numbers that were captured incorrectly in the licensing system.

The Department provides up to 19 types of information regarding each license applicant (including name; date of birth; and Social Security number, if collected) to the Office of the Attorney General on a monthly basis for use in that agency's Child Support Enforcement Program.

The Department should allocate net receipts from the sale of stamps in accordance with statute.

The Department does not allocate the net receipts from the sale of turkey, freshwater fishing, saltwater fishing, white winged dove, and waterfowl stamps to the dedicated funds associated with those stamps as required by Texas Parks and Wildlife Code, Chapter 43. The dedicated funds are used for purposes (such as research and development of habitats) that are directly related to the type of stamps purchased. The Department has not complied with statute because it:

- Has not defined what constitutes net receipts for the stamps associated with super combo licenses and, instead, allocates revenue from super combo licenses through a user-based methodology that depends on harvest surveys results. Because the price of an entire super combo license is discounted, it is not clear what portion of the net receipts from the sale of that license is associated with the individual stamps within that license. Revenue from super combo licenses that is not allocated to the dedicated stamp funds is allocated to the more general Fund 009.

Through its user-based methodology, the Department allocated $3.6 million to the dedicated stamp funds and $18.4 million to Fund 009 in fiscal year 2005. There are different ways in which to define the net receipts from a stamp that is sold as part of a super combo license. For example, if net receipts for a stamp are defined as that stamp's proportionate share of the discounted price of the super combo license (less commission), in fiscal year 2005, $5.2 million more would have been allocated to the dedicated stamp funds within Fund 009.

- Did not allocate $3.6 million in net receipts from the sale of saltwater fishing stamps that were sold as part of fishing packages to a dedicated fund associated with that stamp in license year 2005. This conflicts with Texas Parks and Wildlife Code, Chapter 43, which requires the Department to allocate the net receipts from the sale of a stamp to that stamp's dedicated fund. This occurred because (1) the Department has not established a dedicated stamp fund for this stamp, (2) there was a misunderstanding regarding the surcharge and fee associated with this stamp, (3) there was miscommunication between the licensing division and the financial division, and (4) there were errors in a funding allocation table.

- Did not allocate $373,398 in net receipts from the sale of freshwater fishing stamps that were sold as part of fishing packages to the dedicated fund associated with that stamp in license year 2005. This conflicts with Texas Parks and Wildlife Code, Chapter 43, which requires the Department to allocate the net receipts from the sale of a stamp to that stamp's dedicated fund. This occurred because of (1) a miscommunication between the licensing division and the financial division and (2) errors in a funding allocation table.

The Department does not have a process to monitor the performance of license agents.

The Department effectively monitors its contracted license sales system, which captures information on the sale of hunting and fishing licenses, but it does not have a process to monitor license agents that sell licenses. The Department's monitoring procedures focus primarily on the contracted license sales system, and the Department monitors license agents' retention of records only indirectly. Under the Department's current practice, license agents may decline monitoring, not submit requested information, or not maintain required documentation without penalty.

The Department also does not enforce its requirement that license agents return voided and misprinted licenses within 45 days. As of January 3, 2006, agents had not returned 36,628 voided and 766 misprinted licenses that were processed during license year 2005. The Department credited at least $1.2 million to the accounts of those license agents as a result of those transactions. Because the licensing system posts an immediate credit to the license agent's account when a transaction is voided or misprinted, without Department review of the hard-copy voided or misprinted licenses, the State may be losing revenue if those transactions are not valid.

Expenditures from Fund 009 comply with applicable restrictions, and the Department fully or substantially implemented 80 percent of applicable prior audit recommendations tested.

Audit tests of 81.9 percent of expenditures from Fund 009 indicated that the Department has adequate controls to ensure that expenditures made from that fund comply with applicable restrictions.

During this audit, auditors followed up on 16 recommendations the State Auditor's Office made in 2001 (see An Audit Report on Revenue Management at the Parks and Wildlife Department, SAO Report No. 02-006, October 2001). Six of those recommendations were no longer applicable, primarily because the Department has implemented a new licensing system and has improved its contracts with license agents. Of the remaining 10 recommendations, the Department has fully or substantially implemented 8 (80 percent) and its implementation of 2 (20 percent) recommendations is incomplete or ongoing.

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