MINUTES OF THE ASSEMBLY COMMITTEE ON WAYS AND MEANS Sixty-eighth Session March 30, 1995 The Committee on Ways and Means was called to order at 7:40 a.m., on Thursday, March 30, 1995, Chairman Morse Arberry, Jr. presiding in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Morse Arberry, Jr., Chairman Mr. John W. Marvel, Chairman Mrs. Jan Evans, Vice Chairman Ms. Sandra Tiffany, Vice Chairman Mr. Dennis L. Allard Mrs. Maureen E. Brower Mrs. Vonne Chowning Mr. Jack D. Close Mr. Joseph E. Dini, Jr. Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. Bob Price Mr. Larry L. Spitler COMMITTEE MEMBERS ABSENT: None STAFF MEMBERS PRESENT: Mr. Mark Stevens, Fiscal Analyst Mr. Gary Ghiggeri, Deputy Fiscal Analyst DIVISION OF FORESTRY AUDIT Mr. Gary Crews, Legislative Auditor, introduced Mr. Mike Spell, Principal Deputy Legislative Auditor, who was in charge of the audit of the Division of Forestry. Mr. Crews distributed to the committee a document entitled Audit Report, State of Nevada, Department of Conservation and Natural Resources, Division of Forestry, 1995, a copy of which is on file in the Research Library of the Legislative Counsel Bureau. Mr. Crews said page 1 indicates the audit included an evaluation of the Division of Forestry's financial management practices and related internal controls for processing and recording operating expenses, acquisitions of equipment, allocation and processing of fire suppression costs, and the reimbursement process. The audit covered fiscal years 1993 and 1994. Mr. Crews said page 2 briefly summarizes the results of the audit. Serious financial management and internal control problems resulted in the Nevada Division of Forestry's (NDF's) failure to collect at least $260,000 in reimbursable costs from federal agencies since 1993 because (1) it has not adjusted its billing rates to recover the state's costs, and (2) its systems and procedures are ineffective and unreliable. In addition, inappropriate accounting practices and other errors led to improper and questionable expenditures of at least $250,000 during the last two years. These problems also impair the accuracy and reliability of information prepared by NDF about its financial operations. In addition, because of poor management controls, NDF violated state budgetary and accounting laws, circumvented state purchasing requirements, and misapplied state personnel regulations. These problems stem from significant management control weaknesses and a lack of qualified financial management personnel. However, NDF could have prevented many of these problems if it had implemented recommendations from prior audits. Recently, the Agency has taken some actions to correct these long standing problems, but more steps are needed to ensure allowable costs are recovered, accounting systems provide accurate and reliable information, and state laws and regulations are followed. Mr. Spell referred to page 10, State Costs Not Recovered On Federal Fires, and noted NDF has not periodically reviewed or adjusted its billing rates to ensure the State is reimbursed for costs in fighting federal fires. As a result, the Division failed to recover at least $205,000 in reimbursable expenses since 1993, because billing rates for fire fighting personnel and equipment are too low. Since amounts billed federal agencies recover only a portion of NDF's costs, state funds are unnecessarily spent in fighting federal fires. Mr. Spell referred to page 11, Labor Rates Have Not Been Adjusted, and noted NDF could have recovered additional firefighter reimbursements totaling $110,000 since 1993, if it had used appropriate personnel billing rates. The Division bills federal agencies for firefighter costs based on their hourly wage plus 15 percent for employee overhead. The overhead rate is designed to recover the state's share of retirement costs, workers' compensation (SIIS), and other employee related expenses. However, the 15 percent overhead charge which the Division has used since the 1970's, falls far short of recovering the state's current employee related costs. Based on our analysis, NDF's combined actual overhead costs were about 37 percent of wages during 1994. Mr. Spell referred to page 12, Equipment Rates Are Too Low. We estimate NDF could have recovered additional federal reimbursements of $95,000 over the last two years if proper equipment billing rates had been used. When NDF uses its aircraft or other firefighting equipment on federal fires, it is allowed to bill for the cost of that equipment. However, because the Division has not periodically reviewed or adjusted these rates, they are well below what they should be in order to recover the state's costs. Furthermore, NDF could not provide adequate documentation to support many of the rates it charges. The rates charged for the use of NDF's two fixed-wing aircraft do not recover the state's costs. These aircraft - a 1964 Aero Commander and a 1978 Cheyenne II - are used primarily for firefighting purposes; but they may also be used for administrative flights for NDF and other state and federal agencies. Based on NDF records, about one-half of all flights were billable during fiscal years 1993 and 1994. We estimate NDF billings for direct aircraft costs during this period amounted to about $85,000. However, if NDF had charged rates more in line with its direct costs, it could have recovered about $55,000 more. Mr. Spell referred to page 14, Vehicle Rates Too Low, and noted NDF's billing rates for firefighting vehicles are not sufficient to recover all operating costs. Based on our analysis, the Division recovered only about one-half of its vehicle operating expenses incurred on federal fires during fiscal years 1993 and 1994. As a result, it failed to recover about $40,000 in federal reimbursements over the last two years. Mr. Spell referred to page 15, Billing Process is Unreliable and Untimely, and noted NDF's process for recovering costs incurred in fighting federal fires is unreliable and ineffective. Because of numerous errors on federal billings, NDF failed to recover thousands of dollars in reimbursable costs. Furthermore, these errors delay the reimbursement process, requiring the Division to seek additional funding and causing untimely payments to vendors. These problems result from outdated, burdensome and error prone systems and procedures, and a lack of qualified accounting personnel to ensure all allowable costs are identified, properly recorded and correctly billed in a timely manner. Mr. Spell cited other items in the audit: Billing Errors Result in Unrecovered Costs. Because of flaws in NDF's billing systems and procedures, some allowable costs are not identified, while other costs are not properly recorded or correctly billed. Unrecovered costs due to billing errors found during our testing totaled over $34,000 for the two years examined. However, based on the number of errors found, total unrecovered costs are likely much more. SIIS Costs Not Billed. NDF does not bill federal agencies for the cost of SIIS coverage on temporary firefighters and Nevada Youth Training Center wards. As a result, the State lost about $10,000 in unrecovered SIIS costs over the last two years. Although the Division pays SIIS premiums on these firefighters, it does not bill for these costs. Improper Amounts Billed. NDF failed to recover at least $23,000 during the last two years because of billing errors for conservation camp inmates. We tested six federal filings prepared by one of the regions, and found incorrect billing rates had been used on three occasions. These under billings occurred because of improper procedures for preparing federal cost reports, and a lack of adequate review to ensure billings are proper. Recording and Clerical Errors. NDF's process for recording and billing personnel costs is burdensome and results in countless errors. For example, of the 17 employees tested on one major fire, the correct hourly rate was recorded for only two of these employees. In addition, personnel costs and billings contained numerous clerical errors and improper mathematical calculations. A properly designed cost recovery system should not require NDF firefighting personnel to record hourly billing rates. Furthermore, posting and clerical errors resulting in unrecovered costs totaling thousands of dollars should not occur. These errors could be eliminated through proper procedures and supervisory review. Process Causes Needless Delays. NDF's billing process not only results in numerous errors, it causes unnecessary delays. On average it took 6.5 months from the incident date until payments were received from federal agencies. While some of these delays are due to heavy work loads during the peak fire season, most were due to NDF's ineffective billing systems and procedures. Billing Errors Contribute to Untimely Reimbursements. Because of poor systems and procedures used by NDF to capture costs and bill federal agencies, many billings are rejected or returned for corrections. This further delays the reimbursement process. Of the 13 federal billings we tested, seven were adjusted by the federal agencies due to billing errors or items the federal agencies would not pay for. Untimely Payments to Vendors. Based on our testing, 20 percent of all payments from the Fire Suppression Account took longer than six weeks for NDF to process. These delays can cause undue hardships on vendors and temporary-emergency firefighters waiting for their paychecks. Many of the problems with NDF's billing process result from poorly designed systems and procedures. However, this situation is further complicated because the entire process is carried out by personnel not equipped to deal with accounting matters. NDF needs strong financial management leadership to help develop improved systems, procedures and controls. These steps would not only result in more revenues to the state, but should greatly reduce the time it takes to recover federal reimbursements. Inappropriate Accounting Practices. Due to breakdowns in management controls and inappropriate accounting practices, the Division improperly recorded a number of transactions during 1993 and 1994. As a result, it spent $125,000 that should have reverted to the State General Fund in fiscal year 1993. Furthermore, because NDF has not established proper controls over charges to its Fire Suppression Account, we estimate about $120,000 may have been improperly charged to that account in 1993 and 1994. Improper Accounting for Transactions. NDF improperly accounted for a number of transactions by charging expenses to the wrong account, and crediting revenues to the wrong account or to the wrong fiscal year. Various laws such as the State Budget Act and the State Accounting Procedures Law dictate how transactions should be accounted for; however, we found numerous instances where these laws were not followed. Improper accounting for transactions not only circumvented the state budgetary process, but also resulted in inaccurate and unreliable information about NDF's financial operations. Expenses Charged to the Wrong Account. Due to what appeared to be a lack of communication, the Division inappropriately charged a $15,000 water bucket to its Fire Suppression Account in fiscal 1993 instead of to its Administrative Account. Revenues Credited to the Wrong Account. In April 1993, NDF received reimbursements from the U.S. Forest Service for costs incurred in fighting two large fires on federal land during the previous summer. Detailed reports prepared at the regional office indicated which accounts had incurred the firefighting costs and, therefore, should be reimbursed. However, when the payments were recorded by the administrative office, $40,000 was improperly credited to NDF's Administrative Account, rather than to its Fire Suppression Account. If these funds had been properly accounted for, NDF would have had $40,000 less to spend for administrative costs, and that money would have reverted to the State's General Fund. Division officials could not explain why these reimbursements were improperly recorded, but our analysis shows NDF was experiencing a budgetary shortfall in the Administrative Account during that time. If NDF had properly recorded these transactions, it would have reverted an additional $55,000 to the State General Fund in 1993. Furthermore, NDF could not have paid all of the 1993 expenses incurred in its Administrative Account due to budgetary shortfalls. Other Accounting Errors. Because of accounting errors in preparing fire cost reports, reimbursements totaling $22,000 in 1993 were recorded in NDF's Administration Account, instead of the accounts which should have been reimbursed. NDF also recorded $48,000 of revenues earned during fiscal year 1993 as revenues in fiscal year 1994. Most of these revenues were earned by conservation camps for various projects. Because these funds were improperly recorded, they were available to be spent in fiscal year 1994, instead of reverting to the State General Fund at the end of fiscal year 1993. We also noted a number of adjusting entries which were not supported by documentation, and which the agency could not explain. These included adjusting entries to transfer costs between budgets and expenditure categories, and reductions to amounts listed on accounts receivable ledgers. Questionable Fire Suppression Charges. NDF lacks proper controls to ensure only direct fire-related expenses are charged to its Fire Suppression Account. Because NDF has not established clear policies and guidelines as to what constitutes a direct fire-related expense, we estimate $120,000 may have been improperly charged to the account over the last two years. Examples of questionable charges included: repairs to vehicles not reported as being at the incident; repairs to vehicles when incident reports made no mention of damage; phone bills relating to the administrative office. Management Control Weaknesses Many of NDF's financial management problems can be traced to poor management controls. The lack of effective management controls led to the circumventions and violations of a number of state laws and regulations including the State Budget Act, the State Accounting Procedures Law and State Purchasing Regulations. Loss and Misuse of State Funds. NDF's failure to establish adequate policies, procedures and control systems to mange its operations led to violations and circumventions of state laws and regulations, and the loss and misuse of state resources. Many of these problems would have been prevented if NDF had established proper management controls as required by Nevada law, and as recommended in prior audits. Improper Computer Purchases. The Division had authority to purchase four new PC's for their Minden Dispatch Center in their 1994 and 1995 budget. In April of 1994, they began purchasing computer components such as hard drives, processors, monitors, and keyboards, and assembled these components into workable computers. However, by building the computers, the Division circumvented State Purchasing and the Department of Information Services' regulations. We noted that they had prepared at least 27 individual purchase orders - each under the $750 limit for direct purchases. This is a process known as "invoice-splitting", which is prohibited by state purchasing regulations. NDF procured computer components for five machines, not four as its plan had called for. The Division actually spent $20,000 on computer purchases in fiscal year 1994, even though only $10,000 was budgeted. Unreimbursed Firefighting Costs. The Division responded to a federal fire in September 1992 and failed to recover $21,000 in firefighting costs. Management and staff informed us that the lack of adequate documentation to support the costs of all resources responding to the fire resulted in this loss. However, we have been subsequently informed that the Division has found this documentation as of this last week and they will be resubmitting a claim for these costs. Improper Long-Distance Phone Charges. Another example of lack of management controls involved NDF's payment of personal long-distance phone calls. An ex- employee allowed a friend to use a state phone credit card number. While NDF was subsequently reimbursed, procedures should have been in place to prevent unauthorized use of a state credit card. Payroll Reporting Errors. NDF lacks effective controls to ensure payroll transactions are properly recorded. We noted inconsistent and incorrect payments to some employees. For example, 14 out of 47 temporary firefighters hired during a major fire were underpaid. Failure to Implement Prior Audit Recommendations. Many of the problems identified in this report would have been prevented if NDF had implemented recommendations made in prior audits; some dating back to 1971. Problems noted that still remain uncorrected include: untimely federal billings; improper reporting of payroll transactions; recording transactions to the wrong account or wrong fiscal year; questionable charges to the Fire Suppression Account. Recommendations. We have made seven recommendations to the Division to address these areas of concern. Mr. Spell pointed out page 31 contains the Division's response to the audit, in which they have accepted all findings and recommendations. Page 32 reflects the Division's acceptance of the recommendations. Mrs. Evans observed the most disturbing part of the Audit Report was the failure to implement the recommendations from prior audits. She noted there is a six month follow-up after an audit to determine whether recommendations have been implemented and inquired what could be done to prevent a situation like this. Mr. Crews said the six month follow-up process went into effect in 1987. Prior to that time, the only follow-up was a subsequent audit. There has been an improvement in response by state agencies over the years since the follow-up process went into effect in 1987. Mr. Crews pointed out one problem with the six month follow-up process is that it places responsibility on the Budget Office in the Department of Administration to verify the implementation of those recommendations. The Budget Office is to verify and send the Audit Subcommittee a response to that effect. Mr. Crews indicated a response had been received on this particular audit, one of the first that went through the six month follow-up process, which indicated that all recommendations had been implemented. This particular situation reflects a flaw or possible lack of following the law by the Department of Administration. Mr. Crews indicated he did not believe the problem is widespread, but it is a concern. Mr. Crews said a plan was submitted to the Legislative Commission in September 1994 requesting approval to audit the Department of Administration and whether the six-month follow-up process has been performed. There has been improvement over the past several years. When an agency fails to follow or submit a corrective action plan, the Director of the Department of Administration has the authority to reduce the responsible official's salary to take that corrective action. It has never been enforced. The Audit Division must rely on the Department of Administration and assume their reports are accurate. Mr. Spitler observed there is often a disservice done to managers as they transition from one department to another or as through reorganization they assume responsibility for an area they are unfamiliar with. The audit brings up that failure on the part of state government to give a clean budgetary department to a new director, or at least when a new administration comes into a department to clearly identify the department's status regarding corrective action on prior audits. He indicated consideration should be given to providing better management transition for agency heads. Mr. Spitler asked whether audits relate to possible recovery of any sums of money or whether the audit merely finds faults. Mr. Crews said audit's function is to bring a situation to the attention of management and it is the responsibility of management to follow-up and take corrective action. Mr. Spitler inquired whether the Department of Information Services has proper checks and balances on computer development projects because many times problems have been brought to light through audits after large amounts of money have already been obligated. Mr. Crews responded the Audit Division has not targeted that issue particularly and was not in a position to comment on that. Mr. Spitler noted the improper phone charge issue in the audit and asked whether audits look at any reprimands relating to the improper usage. Mr. Crews said this particular situation occurred with an individual who was no longer employed. Mr. Spitler observed in his experience since 1991 dealing with audits, this agency responded more quickly with action plans than any other agency had. He expressed confidence the problems would be corrected and asked whether Mr. Crews received that same message during the exit interview. Mr. Crews responded the agency indicated willingness to correct the problems and had been very cooperative. Mr. Crews referred to Mr. Spitler's comments regarding movement of agency heads from one department to another and said it does present a problem. Internal controls are instituted to ensure there are documented policies and procedures to aid in the transition from one administration to another. The Internal Audit function in the Department of Administration had as one of its primary mandates to examine internal controls and help agencies set them up; this provides a means to aid managers in transition. Mr. Spitler observed that perhaps an audit division within the Administrative Branch cannot accomplish that function. When large agencies transfer directorships, a team of people should go in at that point to provide support. Chairman Arberry recognized Pete Morros, Director of the Department of Conservation and Natural Resources, who distributed a document entitled "Draft, Audit Correction Plan, Fiscal and Fire Business Management, March 27, 1995" (Exhibit C). Mr. Morros testified the Department has accepted the findings and all recommendations. Assistance has been requested in the form of additional financial management staff through A.B. 129 to provide the professional financial and accounting personnel required to effectively address the recommendations. It is intended to completely restructure the financial management system in the Division and those responsibilities will be moved directly into the Department under the direct supervision of the Chief of Administrative Services. Mr. Morros said main problem areas include internal financial management control weaknesses and lack of qualified financial management staff. Mr. Morros indicated in 1975 there were 42 positions in the Division of Forestry. Now there are 203 authorized positions. There has been virtually no change in internal financial management personnel in that time. The emphasis has always been on fire management and law enforcement with no attention given to building the financial management system. Mr. Morros noted at the time of the previous audit in 1988, the Division did not have the resources to address the findings. The telephone credit card issue could have been avoided if the employee had been required to return his keys and any credit cards assigned to him before he received his final check; however, the individual has been found and the money returned. Ms. Tiffany concurred with Mr. Spitler's comments regarding transitional plans and assistance. She asked what would help managers set fiscal responsibility as a priority. Mr. Morros said the State Forester had informed him two years ago there were financial management problems in the Division; however, because of budget difficulties there were no additional resources to remedy the problem. During the following two years the problem escalated. Ms. Tiffany inquired whether Mr. Morros could have gone to the Budget Director for assistance. Mr. Morros responded that first he should have insured recommendations from the previous audit had been put in place. Mr. Crews agreed the Budget Office has the necessary financial management expertise and should be contacted when an agency needs help. Ms. Tiffany asked whether any sanctions have been imposed. Mr. Crews responded no severe sanctions have been imposed; however, sanctions have included suspensions without pay for a period of time. Mr. Morros observed ultimate responsibility lies with the Director of the Department. He noted the audit identified deficiencies in the fiscal management system in the Division of Forestry but the nature of the Division's activity relating to emergency response and fire suppression must be taken into account. The audit does not address the effectiveness of the fire suppression effort in the state or the staff's commitment. Ms. Giunchigliani agreed with Mr. Spitler's comments that the audit points out the lack of internal controls and lack of management training. She inquired whether A.B. 129 will sufficiently address the audit recommendations. Mr. Morros indicated additional staff may be requested for the next biennium; however, the current staff of an Accounting Specialist and an Account Clerk will move under the direction of the Chief of Administrative Services. New staff will include a Budget Analyst III and an Accounting Specialist. Those four individuals are believed to be sufficient at this time to address the audit recommendations. Mr. Close inquired what the total financial impact of the errors noted by the audit will be. Mr. Crews responded this has not been calculated because there are so many diverse types of problems; however, the estimate for a two-year period is roughly $500,000 for inappropriate expenditures and costs not recovered. Mr. Close asked whether the violations of state law that occurred have been reported. Mr. Crews said in instances of fraud, the Attorney General is notified. Otherwise, the situations are reported to the audit subcommittee and the Legislative Commission for their review and action. Mr. Crews said audit reports have gone to all appropriate individuals and the Attorney General receives a copy of every audit report. Mr. Close asked what had been done within the Department regarding the violations of state law. Mr. Morros said the entire system will be revised to include internal controls to prevent future such occurrences. He reiterated the Division has attempted to make financial managers out of firefighters who did not realize many of the violations were in fact violations and stressed there had been no criminal intent. Mr. Close inquired whether any reprimands had been made to any staff members. Mr. Morros responded affirmatively and indicated some staff had been reassigned to other duties and some staff had resigned. Mr. Fettic expressed his confidence that Mr. Morros would be able to make the necessary corrections. Mr. Spitler asked whether any of the incorrect billings can be rebilled in an attempt to recover some of the losses. Mr. Morros responded rebillings are being aggressively pursued and the first bill reflecting the proper overhead of 37 percent was just paid. Mr. Spitler requested the committee be informed of the status of recovering any prior billings. Mr. Morros agreed to do so and expressed confidence most of the $21,000 from the Cleveland Fire would be recovered. Chairman Arberry called for public testimony. There was none. Chairman Arberry called for introduction of BDR S-1818 which makes a supplemental appropriation to the Committee to Hire the Handicapped of the Department of Employment, Training and Rehabilitation. ASSEMBLYWOMAN EVANS MOVED FOR A COMMITTEE INTRODUCTION OF BDR S-1818. ASSEMBLYMAN SPITLER SECONDED THE MOTION. THE MOTION CARRIED. COMMISSION FOR WOMEN - PAGE 11 David Goldwater, Assembly District 10, spoke in support of the Commission for Women and its Director, Paula Quigliana. Paula Quigliana, Chair of the Women's Commission, distributed a packet of information about the Commission (Exhibit D). She testified one of the Commission's goals relates to keeping women off welfare through job skill training and educational opportunities. Chairman Arberry noted the Commission is required to submit an annual report to the Governor and the Legislature by January 31 of each year which summarizes the Commission's activities, needs and recommendations. He asked whether those annual reports have been submitted. Ms. Quigliana responded Justice Springer had forwarded that report to the Governor. Mr. Marvel requested explanation of the budget request of $3,200 for Information Services. Jere Schultz of the Budget Office responded $2,750 provides for a PC, monitor and printer, and $450 provides for a desk. Mr. Marvel asked where the office is located. Ms. Quigliana said currently the Commission's office is in her home. Ms. Giunchigliani asked what was included in equipment expense. Mr. Schultz said equipment included a fax machine, calculator and copier. Ms. Giunchigliani inquired how often the Commission will continue to meet if the proposed budget is approved. Ms. Quigliana said the proposed budget would enable additional meetings. She indicated the Commission should meet at least every six weeks to two months. Ms. Giunchigliani asked whether secretarial support would be provided within the proposed budget. Ms. Quigliana said legislation would be required in order to hire a secretary or director. Ms. Giunchigliani asked what budget category paid for pamphlets published by the Commission. Mr. Schultz said the operating category provided for printing. Mrs. Brower asked what outside sources currently provide funding. Ms. Quigliana noted Exhibit D contains a list of corporations that have provided funding. Mrs. Brower asked whether any of the corporations would continue to provide funding. Ms. Quigliana said there had been no promise for continued funding on the part of any current donors. Chairman Arberry requested explanation of the personnel item of $14,850 in the budget. Mr. Schultz said this dollar amount is for clerical support and should be included as contract clerical services in operating rather than in personnel. Chairman Arberry requested explanation of the $7,000 for part-time. Mr. Schultz said that was for the director. Chairman Arberry asked whether the Commission plans to obtain office space with the line item "non-state owned building rent" in the amount of $6,000. Mr. Schultz said an allowance is recommended for 500 square feet of rent at approximately $1 per square foot for office space. Mr. Marvel asked whether the sunset clause will be removed. Ms. Quigliana responded it would be in the best interests of the state to retain the Women's Commission. Gwen Clancy, member of the Commission for Women, testified one difficulty with outside funding sources is that typically donated money is earmarked for a particular project. State funding would allow the Commission to set its own agenda. Mrs. Brower requested submission of written outcome indicators and how much money the state would be saved. Ms. Quigliana indicated the information would be forthcoming. Chairman Arberry asked whether the Commission chair and director are the same position. Mr. Schultz responded they are two different people. Chairman Arberry asked what duties the director would perform. Ms. Quigliana said the director would handle correspondence and preparation for Commission meetings. Jonathan Andrews, Chief Deputy Attorney General, spoke on behalf of Attorney General Del Papa in support of the Commission for Women's budget and of the Commission's continuing existence. SCIENCE, ENGINEERING AND TECHNOLOGY - PAGE 17 Don Hataway of the Budget Office testified that in 1993 the Legislature amended the statutes to create the Office of Science, Engineering and Technology. The program description in the Executive Budget remains the mission of the office. Mr. Hataway said when the office was created, the Governor's Office chose to secure a minimum funding support level before staff was recruited. The initial gift to the program of $50,000 was approved by the Interim Finance Committee in the spring of 1994. In September of 1994, through the Office of Research at the University of Nevada, Las Vegas, a $115,000 Experimental Program for the Stimulation of Competitive Research (EPSCOR) was obtained. The Governor's Office began recruiting for the Technology Advisor in the fall. The committee has screened 80 applicants and narrowed the list down to three individuals who will be interviewed. Staff should be hired before the start of the fiscal year. Mr. Hataway said the budget contains expenditures for a Technology Advisor, a Management Assistant III, a half-time Management Assistant II and related operating and travel costs. Chairman Arberry observed in the two years since the office has been created, nothing has been done. Mr. Hataway reiterated the Governor's Office chose not to begin the program until funding was secured. Ms. Giunchigliani inquired when the EPSCOR grant ends and whether there are restrictions relating to expenditure of those funds. She noted the fact that the grant was obtained reflects that there are already individuals who are able to secure funding for science, engineering and technology without having an additional staff position to do that. Mr. Hataway said the statutes assigned responsibility for oversight of this program to the Nevada Industry Science, Engineering and Technology, Inc., so the efforts at securing funding have been part-time. Full-time staff should be even more successful at securing funding. Mr. Hataway indicated the grant application included travel, staff, operating and supported half of the budget. Ms. Giunchigliani inquired what salary the director would receive. Mr. Hataway said the Unclassified Pay Bill established the salary at $75,000. Ms. Giunchigliani asked whether the program would be discontinued if grant funding stopped. Mr. Hataway said if the program becomes successful, General Fund appropriation may be requested at some time in the future. Ms. Giunchigliani expressed concern that the state would become obligated to retain the employees whose jobs would be lost if grant funding disappeared. Mr. Close referred to a portion of the Program Description which states the office will "champion economic development and diversification within Nevada" and noted the Commission on Economic Development has nearly the same mission. He asked why this program could not be a component of the Commission on Economic Development. Chairman Arberry interjected the committee had attempted to configure the office in that manner when it was created. Mr. Hataway said the placement had been a compromise decision. The original proposal had been to operate the program in conjunction with the State Library because of the information systems accessible to the Library; then consideration was given to combining the program with the Commission on Economic Development; ultimately an adjunct office to the Governor was created. Mr. Marvel requested a report detailing the travel portion of the budget. Mr. Hataway indicated he would provide additional information. Mr. Spitler noted possible competition among state agencies for the same grant pools relative to improving science and mathematics education and to economic development and diversification. He asked whether any prioritization of effort or plan has been made to avoid duplication of service. Mr. Hataway said the direction of the office will be predicated upon the talents of the individual being recruited. The program description is a very broad mandate for the office because the office is not intended to obtain grants to provide science and math education services or to provide economic development services. It was intended to recruit an individual with a broad background in technology services to assist education in identifying needs and then education would receive the grants. The Office of Science, Engineering and Technology should function as a grant identifier and will work with education and economic development and the Governor's Office on broad technology issues affecting the state. The number one priority of the Office of Science, Engineering and Technology is to assist state government in identifying how technology can best be used for the benefit of the citizens of the state. Mr. Spitler expressed concern that the direction the program will take depends on the talents of whoever might be hired as director. Mr. Hataway indicated he would provide the recruitment material used to attract the 80 applicants. Mr. Hettrick expressed agreement with Mr. Spitler's comments that a job description has been built around funding. He added that the program description is vague. Mr. Hataway commented that the successful candidate may have more strengths in one area than another and the direction of the office may be predicated on the first person appointed. STATE OCCUPATIONAL INFORMATION COORDINATING COMMITTEE - PAGE 1381 Carol Jackson, Director of the Department of Employment, Training and Rehabilitation, introduced Jim Hanna, Administrator of the State Occupational Information Coordinating Committee (SOICC), Maynard Yasmer, Chief Financial Officer, and Paula Steinbauer of the Budget Division. Chairman Arberry noted the agency's performance indicators do not reflect outcome or effect of services provided. Ms. Jackson agreed and indicated the information was being gathered and would be provided. Chairman Arberry noted the Financial Management Information Reporting System report indicates SOICC balanced forward $229,085 from FY 1994 to FY 1995 but this amount is not reflected in the Executive Budget. He asked why this was omitted. Mr. Yasmer said the information would be provided before the end of the day. Chairman Arberry observed the Governor's budget proposes to transfer SOICC in its entirety to the Information Development and Processing Division. He asked what benefit this would provide. Mr. Hanna explained one of the Division's responsibilities is the production of labor market and occupational information. The function of SOICC is to coordinate the development and dissemination of that information. Throughout the existence of SOICC there has been a close working relationship with the Division. Immediate benefits of the transfer would be the sharing of secretarial support, office equipment and technical support. Savings resulting from the transfer will be put into program areas. Chairman Arberry requested explanation of the out-of-state travel in the M325 decision unit. Mr. Hanna explained SOICC is set up by federal legislation and consequently there is a great deal of federal involvement. The travel funding is for meetings with the National Occupational Information Coordinating Committee, the Department of Labor and the Department of Education. There are also technical work groups relating to occupational information systems and technical committee meetings relating to developing occupational skill coding systems. Chairman Arberry asked why travel funding has increased so dramatically. Mr. Hanna responded emphasis at the national level on one-stop career systems and the school to work programs will result in additional meetings in support of those efforts. Chairman Arberry requested written explanation be provided. Mr. Hanna agreed to do so. Ms. Tiffany asked whether SOICC will be electronically interfaced with other agencies that provide job-skill related services. Mr. Hanna said steps in that direction have been taken. SOICC coordinates with the Nevada Career Information System which is a computerized career information system that provides guidance to school children. It is in place in 15 of the state's 17 school districts. Bringing SOICC into the Research and Analysis area will also provide greater coordination with the Nevada Economic Data System, an electronic data system accessible to anyone with a PC and a modem. Ms. Tiffany asked whether this could lead to kiosks providing job information in areas easily accessible to the public. Mr. Hanna said the goal is to make occupational and labor market information as available as possible. The Employment Security Division already has 30 kiosks throughout the state. Ms. Tiffany asked where those kiosks appeared in the budget. Ms. Jackson said the kiosks appeared in the Employment Security Division budget. She added that there are already kiosks in shopping centers and at public libraries and she would provide a list of the locations. Ms. Jackson said when the Department first began reorganization there was a lack of computer connection between its agencies. Mr. Hanna's first priority has been to connect department agencies so that information can be electronically transferred. Mr. Spitler referred to the Life Skills Assessment Center and asked what services would be provided to Parole and Probation and whether providing services to Parole and Probation resulted in additional costs in the SOICC budget. Ms. Jackson said evaluation is proceeding to determine what services should be provided. She noted many times prisoners are released in Reno where no services are available, so the agency is looking at what can be done to provide services to that population. Ms. Jackson indicated the information relating to what services can be provided to Parole and Probation would be available at the end of April. Mr. Spitler expressed agreement with the plan's concept but said the information was needed sooner than the end of April. Ms. Jackson said she would provide the information by the middle of April. STATE JOB TRAINING OFFICE - PAGE 1387 Barbara Weinberg, Administrator of the State Job Training Office, said the agency provides a second chance for economically disadvantaged individuals to enter the work force and for dislocated workers to re-enter the work force. The agency's mission is to provide employers an applicant pool of qualified workers and to provide potential employees the necessary training and services to succeed in the labor force. Ms. Weinberg said her office oversees federal monies from the Job Training Partnership Act (JTPA) and is responsible for compliance and program quality. The largest programs are run through Nevada Business Services in the four southern Nevada counties and Job Opportunities in Nevada in the 13 northern Nevada counties. Chairman Arberry asked why measurement indicator No. 2, average weekly wage of adult trainees, reflects a decrease from 1994 actual of $304 to projected 1995 of $228. Ms. Weinberg said fiscal 1994 was extraordinary. The Job Training Partnership Act was amended in 1992 to require the agency to serve a much more difficult population; projections were based on a federal model which indicates the probable success with a given population. Chairman Arberry asked how to compare Nevada's program with the national average on the basis of performance indicators. Ms. Weinberg said the national average is the FY 96 and FY 97 projected weekly wage of $245. The agency will develop an actual related to that and in prior years has always exceeded the national average. Ms. Giunchigliani requested explanation of JTPA and the JOBS (Job Opportunities and Basic Skills training program) program through Welfare. Ms. Weinberg explained JTPA is broader and is funded at a higher level but there is a great deal of interaction between her program and the JOBS program. It is very often typical for a JOBS client to receive subsistence through Welfare but training through JTPA. Ms. Giunchigliani asked whether any funding is recaptured from Welfare. Ms. Weinberg indicated at various times there have been subcontracts from the JOBS program to JOIN and Nevada Business Services. She noted discussion is taking place at the federal level relative to linking JOBS with work force development programs like JTPA. Ms. Jackson observed DETR has a comprehensive employment model and has been working with Welfare. Rehabilitation has performed client assessments and was able to identify some Welfare clients with disabilities. Each agency has been involved in the model doing what they do best and it seems to be a much better method. DETR is moving that direction in all of its employment activities. Ms. Giunchigliani requested a report be provided regarding the SIIS referrals to Rehabilitation. Ms. Jackson agreed the information would be forthcoming. Ms. Tiffany agreed with Ms. Giunchigliani that possibly JOBS and JTPA should be merged. She noted the function of job training was working well but the function of job placement needed work. Ms. Tiffany requested that performance indicators include information relating to placements in small businesses versus placement in corporate businesses. She also asked whether there was a way to either recover costs or screen clients better so that training and time were not invested in an individual who immediately moved to another state. Ms. Jackson agreed that this is a problem and DETR is also concerned about money lost in training individuals who immediately move away. Mrs. Evans observed the interim Welfare Reform Task Force submitted a proposal and asked whether a DETR representative had been part of that interim task force. Ms. Weinberg said a representative from JOIN sat on the task force as did a representative from Nevada Business Services so there was input from job training professionals. Ms. Weinberg said in a number of states the JOBS program is in a department similar to DETR. She added five out of the six measurement indicators are federal measures and several years ago a shift was made from measuring placement rate to measuring retention rate. The agency is measured regarding retention in a job three months after a person leaves the program. Mrs. Evans asked why rent costs have increased by 43 percent. Ms. Weinberg explained on June 30, a five year lease will end. The increase in rent cost represented the potential new cost; however, the agency plans to move into a state-owned building as a part of the larger DETR organization and rental costs may be lower than projected. Mrs. Evans requested the committee be notified as soon as the costs are known. Ms. Jackson indicated the information would be provided by April 7. Ms. Weinberg said a portion of the rent increase also resulted from the fact that there is now a position in southern Nevada and a new rental location. The position was approved by the Interim Finance Committee in September. Ms. Evans requested the amount of the additional rent for that location be provided. Mrs. Evans noted the Federal Funds Information for States publication indicates $2 million more in JTPA allotments will be coming to Nevada than is reflected in the Governor's budget. Ms. Weinberg was unaware of this information. She said the publication date may have been prior to recisions by the federal government. Mrs. Evans requested the information be reviewed and reconciled with the Budget Office. Ms. Jackson observed there are major recisions totaling almost $4 million in the State Job Training Office in the summer youth programs and year around youth programs. Mrs. Evans requested the Legislature be informed of those outcomes. Ms. Weinberg said the recision proposal adopted in the U.S. House of Representatives totally zeroed out the summer youth program in the amount of $4 million to the state of Nevada. Mrs. Evans inquired if there are any alternatives for those youngsters during the summer. Ms. Weinberg said conversations have been held with JOIN and Nevada Business Services regarding alternatives. Effort may be made to increase the level of private sector involvement so more youngsters can work and the agency can provide some minor oversight and placement assistance. Another alternative is to talk to school districts to see whether they can replace some of the JTPA funding that provides summer tuition assistance. Mrs. Evans confirmed the recision would impact this summer's program. Chairman Arberry referred to decision unit E710 which requests funding for a software upgrade and asked whether this was not a duplication of a request approved by the Interim Finance Committee. Ms. Weinberg agreed that it was a duplication and indicated the necessary adjustments would be made to the budget. Chairman Arberry confirmed decision unit E710 would be reduced by approximately $2,500 for FY 96 and by approximately $5,000 for FY 97. Mr. Yasmer indicated a written response had been provided to fiscal staff. With no further business to come before the committee, the hearing was adjourned at 10:37 a.m. RESPECTFULLY SUBMITTED: Deborah Salaber, Committee Secretary Assembly Committee on Ways and Means March 30, 1995 Page