1 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 7 MEETING OF THE TEXAS § 8 LOTTERY COMMISSION § 9 10 11 COMMISSION MEETING 12 Monday, May 12, 2014 13 14 15 16 BE IT REMEMBERED THAT on Monday, the 12th 17 day of May 2014, the Texas Lottery Commission meeting 18 was held from 1:30 p.m. until 2:01 p.m., at the Offices 19 of the Texas Lottery Commission, 611 East 20 6th Street, Austin, Texas 78701, before CHAIRMAN J. 21 WINSTON KRAUSE, and COMMISSIONERS MARY ANN WILLIAMSON, 22 KATIE DICKIE STAVINOHA (Via Conference Call) and JODIE 23 G. BAGGETT (Via Conference Call); that the following 24 proceedings were reported via machine shorthand by Lou 25 Ray, a Certified Shorthand Reporter. 2 1 APPEARANCES 2 CHAIRMAN: Mr. J. Winston Krause 3 COMMISSIONERS: 4 Ms. Mary Ann Williamson Ms. Katie Dickie Stavinoha (Conference Call) 5 Ms. Jodie G. Baggett (Conference Call) 6 GENERAL COUNSEL: Mr. Robert F. Biard 7 EXECUTIVE DIRECTOR: 8 Mr. Gary N. Grief 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS, MONDAY, MAY 12, 2014 .................. 5 4 I. Notice of Public Meeting by Telephone Conference Call. Pursuant to Section 551.125 5 of the Texas Government Code, one or more Texas Lottery Commissioners may participate 6 in this public meeting by telephone conference call because (1) a public necessity exists 7 requiring immediate action because of the reasonably unforeseeable resignation of the 8 Commission's Charitable Bingo Operations Director on May 1, 2014, and the resulting 9 absence of a Director (or Acting Director) to administer the Division and to address the 10 ongoing review of Charitable Bingo Operations Division business processes, procedures, and 11 rules; and (2) the convening at one location of a quorum of the Commission is difficult 12 or impossible. The location of the public meeting will be Texas Lottery Commission 13 Headquarters, 611 E. 6th Street, Austin, Texas 78701 14 The Texas Lottery Commission will call the meeting to order .............................. 5 15 II. Commission may meet in Executive Session: ..... 8 16 A. To deliberate the appointment, employment, 17 and/or duties of a Charitable Bingo Operations Director pursuant to Section 18 551.074 of the Texas Government Code 19 B. To deliberate the appointment, employment, and/or duties of an Acting Charitable 20 Bingo Operations Director pursuant to Section 551.074 of the Texas Government 21 Code 22 III. Return to open session for further deliberation and possible action on any 23 matter discussed in Executive Session ......... 9 24 25 4 1 TABLE OF CONTENTS 2 PAGE 3 IV. Consideration of and possible discussion and/or action, including but not limited 4 to appointment of a subcommittee, on the review of Charitable Bingo Operations 5 Division business processes, procedures, and rules ..................................... 11 6 V. Public comment ................................ 17 7 VI. Adjournment ................................... 18 8 REPORTER'S CERTIFICATE ............................. 19 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 1 P R O C E E D I N G S 2 MONDAY, MAY 12, 2014 3 (1:30 p.m.) 4 AGENDA ITEM I 5 CHAIRMAN KRAUSE: This afternoon I call 6 the meeting of the Texas Lottery Commission in session. 7 Today is May the 12th, 2014 and the time is 1:30 p.m. 8 And we have Commissioner Baggett on the line. 9 Commission Williamson is with me. And, of course, I'm 10 here, so we have a quorum. I think I may have heard 11 Commissioner Stavinoha is now with us. 12 COMM. STAVINOHA: Yes. 13 CHAIRMAN KRAUSE: Excellent. I'd like to 14 remind Commissioner Stavinoha and Commissioner Baggett 15 to identify themselves if they want to say something so 16 that for the record we'll know who is making the 17 comments. 18 Before I begin the agenda item, which is 19 going to start with executive session, I'm going to make 20 a couple of comments about Sandy Joseph. On May the 1st 21 she called me and gave me the courtesy heads up that she 22 had decided to resign her position as director of 23 charitable bingo as of May 15th. She has worked for the 24 State of Texas for 35 years. That's 35 years of great 25 service by a qualified person who has a great attitude 6 1 and we were really pleased to have her work here at the 2 Lottery Commission for the last 10 years. 3 When we had a vacancy in the lottery -- in 4 the bingo director spot the last time, she was hands 5 down the best person and we were really pleased when she 6 threw her hat in the ring on that. We looked at other 7 qualified candidates, but decided to go with Sandy. 8 So the work that she had taken on was a 9 really special amount of work, primarily because here at 10 the Lottery Commission we do two things: We run the 11 lottery, but we regulate charitable bingo. Those are 12 two significantly different activities. So we are the 13 regulator for charitable bingo. 14 That is a part of our agency that was 15 subject to serial budget cuts at a time when it really 16 did not need that. It was difficult for us to 17 understand how we were going to be expected to regulate 18 charitable bingo with a continuously diminishing budget, 19 and, frankly, antiquated computer system at the time. 20 Simultaneously, with Sandy coming on 21 board, we were finally given the go-ahead by the 22 Legislature to acquire a new computer system that was 23 going to help us come into the 21st century and become 24 more effective as regulating the business of charitable 25 bingo. That, when it got started, presented some 7 1 significant challenges for the bingo division. 2 And so while we're going to miss 3 Ms. Joseph, I am not surprised that it was something 4 that she was seeing as being very, very difficult, and I 5 admire her for sticking with it and am sorry that she's 6 gone because I think that she would still be good to 7 help us out with that. 8 In the meantime, this ongoing process of 9 integrating the new system with the old system 10 continues. And as we peel back the onion we find that 11 there are things that need to be resolved as we go 12 along. I predict that we will have many rulemakings as 13 we go through, and so it's very, very important that we 14 have a bingo director, which is why we're having our 15 meeting today. 16 Today what we're going to do in executive 17 session is to discuss starting the process of 18 acquiring -- or hiring a new bingo director, and then we 19 also want to take official action to appoint an acting 20 bingo director in the meantime. 21 Commissioners, do we have any comments? 22 COMM. WILLIAMSON: No, I have none. This 23 is Williamson. 24 CHAIRMAN KRAUSE: Our online 25 Commissioners? 8 1 COMM. BAGGETT: Baggett, no. 2 COMM. STAVINOHA: Stavinoha, no comments. 3 CHAIRMAN KRAUSE: Thank you, ladies. 4 AGENDA ITEM NO. II 5 CHAIRMAN KRAUSE: All right. The first 6 item is executive session. This is a little unusual 7 because we're going to go straight into executive 8 session. We're not used to doing that. 9 But I move that the Texas Lottery 10 Commission go into executive session to deliberate the 11 appointment and employment and the duties of a 12 charitable bingo operations director, and discuss 13 appointing an acting charitable bingo operations 14 director pursuant to Section 551.074 of the Texas 15 Government Code. 16 Is there a second? 17 COMM. WILLIAMSON: Second. 18 CHAIRMAN KRAUSE: Okay. I call for a 19 vote. All who approve say "aye." 20 COMM. WILLIAMSON: Aye. 21 CHAIRMAN KRAUSE: Aye. 22 Online Commissioners? 23 COMM. BAGGETT: Baggett, aye. 24 COMM. STAVINOHA: Well, that's a quorum. 25 Any nays? 9 1 (No response) 2 CHAIRMAN KRAUSE: Hearing no nays, then we 3 are going into executive session. It is precisely 4 1:36 and we adjourn the public portion to re-adjourn in 5 executive session. 6 (Recess: 1:36 p.m. to 1:50 p.m.) 7 AGENDA ITEM NO. III 8 CHAIRMAN KRAUSE: The Texas Lottery 9 Commission is out of executive session at 1:50. There 10 is action to be taken as a result of the executive 11 session. 12 The Commission would like to respectfully 13 request that Commissioner Williamson coordinate with the 14 Commission staff on the application process for filling 15 the charitable bingo operations director position. 16 Therefore, I make the following motion: To delegate 17 to -- that the Commission as a whole delegate to 18 Commissioner Williamson the authority to coordinate with 19 the human resources director and other Commission staff 20 as she deems necessary without the need for further 21 Commission discussion or action to finalize the posting 22 for the charitable bingo operations director, to post 23 the position, and decide on the process for screening of 24 applicants, to conduct background investigations, 25 schedule interviews and other administrative matters 10 1 related to the application process. 2 Further, we move that Commissioners 3 Williamson and Baggett conduct initial interviews of 4 applicants for the bingo director position, which will 5 occur at a posted meeting of a little subcommittee 6 composed of Commissioners Williamson and Baggett, and to 7 select the top applicants for the Commission as a whole 8 to interview. 9 The Commission, at a later posting -- at a 10 later posted meeting will conduct final interviews and 11 consider selecting a finalist for that position. 12 That's a big motion, but I call for a 13 vote -- I call for a second. 14 COMM. WILLIAMSON: Second. 15 CHAIRMAN KRAUSE: All in favor say aye. 16 COMM. WILLIAMSON: Aye. 17 CHAIRMAN KRAUSE: Aye. 18 COMM. STAVINOHA: Aye. 19 COMM. BAGGETT: Aye. 20 CHAIRMAN KRAUSE: I heard four "ayes," so 21 the vote is unanimous. 22 We have another motion, and we're going to 23 hear from Commissioner Williamson on that. 24 COMM. WILLIAMSON: I move that the 25 Commission appoint and employ Debbie Parpounas as acting 11 1 charitable bingo operations director at an annual salary 2 of $120,000 effective May 12th, 2014. 3 Is there a second? 4 CHAIRMAN KRAUSE: I second. All in favor 5 say aye. 6 COMM. WILLIAMSON: I. 7 CHAIRMAN KRAUSE: Aye. 8 COMM. BAGGETT: Aye. 9 COMM. STAVINOHA: Aye. 10 CHAIRMAN KRAUSE: Hearing four "ayes," 11 then the vote is unanimous. 12 AGENDA ITEM NO. IV 13 CHAIRMAN KRAUSE: Next we're going to take 14 into consideration the possible discussion and/or 15 action, not limited to the appointment of a subcommittee 16 on review of the charitable bingo operations division's 17 business procedures, processes and rules. Our internal 18 auditor is going to give us a little bit more 19 information on this before we act. 20 Yes, ma'am. 21 MS. BROWN: Hello. Good afternoon. My 22 name is Darlene Brown, and I'm the internal auditor for 23 the Lottery Commission. And during the last Commission 24 meeting, I reported to you on internal audit's 25 activities of what we've done so for with the charitable 12 1 bingo organization in alignment with the BOS 2 implementation. During that process we noted that some 3 of the business processes currently in place are not in 4 alignment with statutes or some administrative rules, 5 and sometimes with generally accounting -- accepted 6 accounting principles. 7 Between that period and now, we've 8 continued to work with charitable bingo on the BOS 9 implementation, and also looking further into these 10 business processes. And as we do so, we find more and 11 more business processes not in line with either the 12 administrative rule or statute or accounting principles. 13 Because of all the additional statutes, 14 regulations, and accounting principles that they're 15 required to adhere to, and the criticality of what we're 16 seeing, we believe that a restructuring -- business 17 processes restructuring project needs to be undertaken 18 immediately. And in order to do that, this involves -- 19 is going to help the BOS implementation and making sure 20 that all the processes that are being designed will fit 21 into the BOS without having to come back and retrofit 22 that system later as we correct processes. 23 This project is going to require extensive 24 time, effort and resources. Because bingo needs to 25 continue their daily operations and support their 13 1 customers, we're also recommending that a separate 2 restructuring team be put in place just for this 3 project. And that team consists of various resources 4 within the agency, plus ourselves and with the 5 assistance of the Commissioners also. 6 What we're asking you is that -- to 7 approve this project and the project plan, and a 8 document that I put together. But what is important to 9 note is that although this is a project team outside of 10 the bingo, we're working every day with every single 11 process so that bingo is intimately involved in the 12 redesign of these processes and still able to function 13 and support their customers. 14 Now, typically a project of this nature is 15 led and spearheaded by the chief executive of the 16 business operations; however, with the resignation, 17 that's left a void. So we're asking that you still move 18 forward without having a permanent director in place by 19 approving this project and roles and responsibilities 20 that we propose to you, and that's in your packet. 21 So we're making three recommendations to 22 you. The first one is that you authorize the Charitable 23 Bingo Operations Division Business Process Restructuring 24 Project. The second recommendation is that you approve 25 the business process restructuring team structure and 14 1 project plan that we propose. And that the third would 2 be that you authorize the bingo director and the interim 3 director to approve any modifications to the project 4 plan and the roles and responsibilities that may be 5 needed as we progress in this project. 6 I'll be happy to answer any questions that 7 you might have. 8 CHAIRMAN KRAUSE: I don't have any 9 questions, but we are going to give you an acting 10 director. 11 MS. BROWN: Perfect. 12 COMM. WILLIAMSON: It's my understanding 13 that this plan -- you know, I know the timeline is set 14 in place, but that obviously it's going to be somewhat 15 fluid because, you know, even though sometimes a 16 deadline is set, for various reasons maybe that needs to 17 be changed a little bit. So I just understand that this 18 is somewhat of a -- from a timeline perspective could 19 be -- could be flexible a little bit. 20 MS. BROWN: Correct. The project plan 21 that we proposed to you is based on the information that 22 we've gathered so far. To date we've got well over a 23 hundred business processes that we need to look at, so 24 those dates may slip a little bit. But we will always 25 keep everybody informed of those dates, and additional 15 1 things may need to be added. 2 COMM. WILLIAMSON: Sure. Okay. That's 3 all the questions I have. 4 CHAIRMAN KRAUSE: Okay. Commissioners 5 Baggett and Stavinoha, do you have any questions? 6 COMM. BAGGETT: Baggett does not. 7 COMM. STAVINOHA: Katie Stavinoha does 8 not. 9 CHAIRMAN KRAUSE: Thank. We have a 10 motion? 11 COMM. WILLIAMSON: Yes. I move that the 12 Commission authorize the Charitable Bingo Operations 13 Division Business Process Restructuring Project because 14 work to address the critical matters identified must 15 proceed while we go through the process of hiring a 16 director. We also approve the restructuring project 17 plan and team structure, and authorizing the charitable 18 bingo operations director and the director when one is 19 hired to approve modifications to the plan as needed. 20 CHAIRMAN KRAUSE: Is there a second? 21 COMM. BAGGETT: This is Commissioner 22 Baggett. I second that. 23 CHAIRMAN KRAUSE: Excellent. I call for a 24 vote. All in favor say aye. 25 COMM. WILLIAMSON: Aye. 16 1 CHAIRMAN KRAUSE: Aye. 2 COMM. BAGGETT: Aye. 3 COMM. STAVINOHA: Aye. 4 CHAIRMAN KRAUSE: I hear four "ayes." 5 That carries unanimously. 6 COMM. WILLIAMSON: Chairman Krause, one 7 thing before we proceed. I guess we should ask Debbie 8 if she's willing to accept this position before we start 9 making all these plans. 10 CHAIRMAN KRAUSE: As acting director? 11 COMM. WILLIAMSON: As acting director. 12 MS. PARPOUNAS: I do, and I appreciate 13 your confidence. And I will move towards working with 14 the team and moving the restructure project along. 15 Thank you. 16 COMM. WILLIAMSON: All right. Thank you. 17 MR. BIARD: And, Commissioners, the audio 18 folks told me that we might have had a -- they might 19 have not picked up the motion to make Ms. Parpounas the 20 acting director, so I was going to summarize -- restate 21 for the record that a motion was made to appoint her 22 acting director for the bingo division at a salary -- 23 CHAIRMAN KRAUSE: Okay. Well, that's 24 going to be for the record, so we've already voted on 25 it. 17 1 MR. BIARD: Right. 2 CHAIRMAN KRAUSE: Right? Okay. We're 3 going to have another motion, and it's going to be a 4 pleasure to make this motion to authorize a subcommittee 5 many of the Commission of some folks that have special 6 expertise in bingo. So I move that the Commission 7 approve the creation of the subcommittee for the Bingo 8 Business Process Restructuring Project to be composed of 9 Commissioners Williamson and Baggett. This subcommittee 10 will serve as a Commissioner point of contact for the 11 acting bingo director and the internal auditors, as well 12 as the director -- the permanent director when one is 13 hired -- and will monitor the team's progress on the 14 restructuring project. 15 Is there a second? 16 COMM. WILLIAMSON: I second. 17 CHAIRMAN KRAUSE: All in favor say aye. 18 COMM. WILLIAMSON: Aye. 19 CHAIRMAN KRAUSE: Aye. 20 COMM. BAGGETT: Aye. 21 COMM. STAVINOHA: Aye. 22 CHAIRMAN KRAUSE: That vote is unanimous 23 and carries. 24 AGENDA ITEM NO. V 25 CHAIRMAN KRAUSE: Next item is public 18 1 comment. And I'm not aware that anybody has signed up 2 to speak. 3 If they do, speak now or forever hold your 4 peace. 5 (No response) 6 CHAIRMAN KRAUSE: I hear nothing. 7 AGENDA ITEM NO. VI 8 CHAIRMAN KRAUSE: So therefore I believe 9 this concludes the business of the Commission for this 10 meeting. Is there a motion to adjourn? 11 COMM. WILLIAMSON: Chairman, I make a 12 motion to adjourn this meeting. 13 CHAIRMAN KRAUSE: I second. 14 All in favor say aye. 15 COMM. WILLIAMSON: Aye. 16 CHAIRMAN KRAUSE: Aye. 17 COMM. BAGGETT: Aye. 18 COMM. STAVINOHA: Aye. 19 CHAIRMAN KRAUSE: Hearing four votes, 20 there's no need to call for nays. This Commission 21 meeting is adjourned it looks like at 2:01. 22 (Proceedings concluded at 2:01 p.m.) 23 24 25 19 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Lou Ray, Certified Shorthand Reporter 5 in and for the State of Texas, do hereby certify 6 that the above-mentioned matter occurred as 7 hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings of 9 such were reported by me or under my supervision, 10 later reduced to typewritten form under my 11 supervision and control and that the foregoing pages 12 are a full, true, and correct transcription of the 13 original notes. 14 IN WITNESS WHEREOF, I have hereunto set my 15 hand and seal this 13th day of May, 2014. 16 17 ___________________________________ 18 LOU RAY Certified Shorthand Reporter 19 CSR No. 1791 - Expires 12/31/15 20 Firm Registration No. 276 Kennedy Reporting Service, Inc. 21 7800 N. MoPac Expressway, Suite 120 Austin, Texas 78759 22 512.474.2233 23 24 25