MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session January 24, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Tuesday, January 24, 1995, in Room 223 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator William J. Raggio, Chairman Senator Raymond D. Rawson, Vice Chairman Senator Lawrence E. Jacobsen Senator William R. O'Donnell Senator Bob Coffin COMMITTEE MEMBERS ABSENT: Senator Dean A. Rhoads (Excused) Senator Bernice Mathews (Excused) STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Prinicipal Deputy Fiscal Analyst Larry L. Peri, Program Analyst Pamela Jochim, Committee Secretary OTHERS PRESENT: John P. Comeaux, Director, Department of Administration Jim Manning, Budget Analyst, Budget Division, Department of Administration Gary Crews, Legislative Auditor, Audit Division, Legislative Counsel Bureau Paul Townsend, Principal Deputy Legislative Auditor, Audit Division, Legislative Counsel Bureau Donald L. Bailey, Sr., Chief, State Printing and Micrographics Division, Department of Administration Tracy Raxter, Chief, Administrative Services Division, Department of Administration Lyn Callison, Accountant Technician III, Administrative Services Division, Department of Administration Thomas A. Tatro, Chief, Purchasing Division, Department of Administration Debra Meizel, Program Chief, Purchasing Division, Department of Administration Senator Raggio invited Gary Crews, Legislative Auditor, Audit Division, Legislative Counsel Bureau, to come forward and give a brief overview of the audits completed by the Audit Division in the last 2 years. Mr. Crews distributed a report (Exhibit C. Original is on file in the Research Library.) summarizing their audit findings. He referred the committee to page 15 of the report which addresses the audit findings regarding the Department of Administration, Buildings and Grounds Division, and the State Mail Room. He noted an audit of the State Mail Room indicated it had not obtained maximum postage discounts through the use of new technology and by working with the United States Postal Service. In addition, the State Mail Room did not require state agencies to prepare their mail in a machine-readable format, which would reduce postage rates. The Audit Division estimated $574,000 would be saved over the next biennium in the budget by consolidating and automating plant operations, using state employees to transport interdepartmental mail, and by using air cargo instead of private vendors. Mr. Crews directed the committee's attention to page 32 of Exhibit C, the audit summary for the Department of Taxation. He noted the audit focused primarily on the Business Tax program. The audit found businesses subject to the business tax were not always identified or did not pay the proper amount. As a result, 10 percent of all businesses subject to the tax in 1993 failed to pay their business tax. Furthermore, the businesses who did pay, approximately one in three paid less than what was actually owed by law. It was estimated the state lost $1 million because of errors made by the Department of Taxation. The Audit Division estimates business tax collections could be increased by $3.6 million during the next biennium if enforcement methods are improved. Referring to the Telecommunications Division audit summary on page 39 of the report, Mr. Crews said the division needs to develop controls to ensure equipment is purchased at the most economical cost. Substantial savings would be obtained if certain types of equipment were purchased instead of rented. The statutes and the State Administrative Manual are vague as to who was required to utilize the services of the Telecommunications Division and as a result, state agencies are entering into agreements with long-distance providers without the division's input or approval. The audit findings regarding the Housing Division on page 60 indicated participation in the Single Family Affordable Housing Program dropped significantly from 1991 to 1993. Although economic conditions and falling interest rates may have caused some of the decline, it is believed some of the policies followed by the Housing Division also contributed to the significant drop. A survey of six states indicated they purchased 2,721 mortgages in 1992 and 1993, while Nevada only purchased 376. The findings raised some serious questions as to how actively the program is being administered. Mr. Crews directed the committee's attention to the Child Welfare Services' audit on page 78 of the report. The Audit Division found the agency could increase federal Title IV funding to offset General Fund appropriations by $150,000 annually, if the agency were more aggressive in managing its caseload. In addition, $290,000 in federal IV-E funds could have been used to offset General Fund appropriations, if retroactive IV-E eligibility adjustments had been taken. Referring to the audit findings regarding the Employment Security Division (ESD) on page 82 of Exhibit C, Mr. Crews stated ESD failed to comply with depository laws and regulations which resulted in lost interest and unnecessary bank service charges totaling approximately $800,000. ESD also failed to follow changes made in the State's Employment Training Program law, resulting in an erroneous transfer of $1 million of state funds to the Federal Unemployment Insurance Trust Fund. Savings up to $130,000 a year would be realized if claims were filed and paid on a biweekly basis instead of a weekly basis. Mr. Crews stated the audit of the Registration Division, Department of Motor Vehicles and Public Safety (DMV&PS) found between 1987 and 1991, the DMV&PS charged incorrect privilege taxes on vehicles less than 9 years old. It is estimated the underpayments during this time period totaled more than $9 million. Although most vehicle owners were undercharged, there were many who were also overcharged. The underpayment of privilege taxes was caused by a computer error dating back to 1987 that was never detected by the DMV&PS. Page 88 of the report covers the audit findings for the Insurance Verification Program administered by the DMV&PS. The audit discovered the program has not been successful in getting uninsured motorists off Nevada's roads. The success of the program has been hindered because of the following: (1) insurance companies do not report accurate and timely policy information to the DMV&PS; ( 2) the DMV&PS's procedures and systems are outdated and ineffective; and (3) enforcement measures are inadequate. Senator O'Donnell inquired if the audit was performed before the implementation of the new program. Mr. Crews explained the audit was conducted before the new program took effect. He asserted if the new program is not administered correctly, it too will have problems. The Audit Division had the DMV&PS scheduled for a meeting in December 1994, to give an update on the new program, but because of programming problems the meeting was canceled. The Audit Division does not "feel comfortable at this point in time" with the DMV&PS administration of the program. Senator Raggio questioned why the DMV&PS did not accept the Audit Division's recommendation regarding the confiscation of license plates for uninsured motorists. Mr. Crews stated the DMV&PS did not like being put in the position of directing a peace officer in a rural area to confiscate a person's license plate. The Audit Division maintains the recommendation is valid and would be effective in assisting the program. Mr. Crews referred to the audit summary of the State Printing and Micrographics Division listed on page 12 of the report. He pointed out the print shop lost more than $200,000 in 1993 because rates charged in many cases did not cover the cost of the print job. Because of increased losses, the Printing Division has not adequately funded its equipment replacement account in the past few years. The division has also not utilized the automated cost accounting system to monitor production efficiency. As a result, agencies have been charged different amounts for repeat jobs. Agencies, in some instances, have been charged 50 percent more for a repeat printing job. Senator Raggio questioned what the turnaround time is for a printing job. Mr. Crews responded the Audit Division determined the average turnaround time is 21 days. State agencies indicated to the Audit Division they are concerned with the Printing Division's turnaround time. In referring to page 18 of the report, the State Motor Pool Division, Mr. Crews said the division found the motor pool needed to establish administrative controls to ensure economical utilization of vehicles. Controls needed to be established to monitor vehicle use, vehicle rental rates, and vehicle replacement schedules. A savings of $612,000 could be realized by revising rental rates and monitoring vehicle use. Improving the division's home storage policy would also allow for more savings. It was estimated the Motor Pool Division could save approximately $487,500 in future vehicle replacement costs by eliminating or reassigning low-use vehicles. Senator Coffin asked whether the audit took into consideration employees who in emergency situations could not stop by their office for a vehicle, but needed to go straight to the field. Mr. Crews answered that is the primary reason most employees are allowed to take vehicles home, but the Audit Division is concerned the privilege may lead to abuse. Senator Coffin inquired if employees were reimbursed when they were required to use their own vehicle. Mr. Crews informed the senator it is the state's policy to reimburse employees for use of their private vehicles. The majority of the problems encountered with vehicle home storage have occurred with the Division of Parole and Probation. Senator Raggio stated a subcommittee would be formed to monitor the programs listed in the audit report. Senator Jacobsen and Senator O'Donnell were appointed to the audit subcommittee. Senator Rawson noted Mr. Crews did not cover the audit findings regarding the State Department of Education. The senator said he reviewed the section on page 9 of the report and found the results to be "fairly startling." The audit revealed performance measurement objectives were not specific and measurable. He asked if Mr. Crews had any comments regarding the audit findings. Mr. Crews said the Audit Division has worked closely with the education department and he surmised the department did not understand the concept of performance measurements. The Audit Division has instructed the department on how performance indicators should be implemented. The department has been receptive to the Audit Division's recommendations and is moving forward in addressing the problem. Senator Rawson questioned when the Department of Education would be reevaluated. Mr. Crews responded a 6 month report would be done by the Department of Administration to evaluate the implementation of the audit recommendations. The Department of Administration would then report back to the Audit Division. The Audit Division would not evaluate the agency again until after the legislative session. Senator Rawson asked for the completion date of the audit. Mr. Crews stated it was completed last summer. Senator Rawson stated the education department should be notified that when their budget comes before the committee, they will be questioned regarding their performance measurements. Senator Raggio turned the committee's attention to the budget of the State Printing Office. State Printing Office - Page 501 Donald L. Bailey, Sr., State Printer, State Printing and Micrographics Divisions, Department of Administration, came forward and testified the agency provides printing and reproduction services to all state agencies. The division also provides technical oversight to state agencies needing to purchase new copiers. The division's average turnaround time is 3-6 weeks. He pointed out a request for business cards may take 3 days, while printing the Nevada Revised Statutes takes up to 70 days. He noted the Audit Division took into consideration only 100 jobs in determining the division's average turnaround time. He related the division has 489 jobs presently working, in addition to the printing jobs required by the legislature. Senator Raggio noted the 1992 National State Printers Association survey indicates the 21 day turnaround time is more than double the 9 day average achieved by other government print shops. The senator questioned why the division's turnaround time was so high. Mr. Bailey explained the states sampled by the auditors have very small print shops compared to Nevada's operation. Presently, approximately 30 states have "good sized" print shops. He stated the division's turnaround time will improve in the next 6 month period. Mr. Bailey explained the number of printing impressions has declined since 1991, because of the addition of new equipment. Senator Raggio observed the budget indicated flat revenues for the next biennium. He asked if the division has adjusted their billing rates. Mr. Bailey said the division has complied with the Audit Division's recommendation and a rate adjustment was made in July. Senator Raggio asked whether the rate adjustment is sufficient, so costs would not exceed revenues. Mr. Bailey responded the rate adjustment was adequate. The division would review the figures again in 4 months and if the increase was not sufficient, then another adjustment would be considered. Senator Raggio noted the audit recommended the division to implement written procedures establishing and monitoring billing rates. Mr. Bailey said the division has already acted on the recommendation and a written copy has been provided to the Audit Division. Senator Raggio questioned if the budget reflected the billing rate increase. Mr. Bailey responded the budget did not reflect the rate increase, but he will furnish the committee with the new figures. Dan Miles, Senior Fiscal Analyst, Legislative Counsel Bureau, asked the Budget Division why no Vacancy Savings were included in the printing division's budget and other non-General Fund accounts. John Comeaux, Director, Department of Administration, replied he has researched the matter and discovered the Budget Division did not include Vacancy Savings in non-General Fund budget accounts. The Budget Division will be researching the matter further to determine what impact it will have on non-General Fund agencies. He will have the necessary information within the next few days. Senator Raggio requested Mr. Bailey to explain how his division utilizes Total Quality Management (TQM) procedures. Mr. Bailey responded the division has put together three quality control teams. The teams meet and discuss quality issues, turnaround times, and policies and procedures of the division. TQM recommendations have contributed to increases in order entry. The TQM program was implemented in July 1994. Senator Raggio asked what agencies are under the TQM mandate. Mr. Comeaux responded there are two other agencies participating in the mandate. He was uncertain which agencies were participating, but would get back to the committee with the information. Senator Raggio noted the TQM program is a new concept and asked Mr. Comeaux to give the committee an overview of the program at a later date. Mr. Bailey stated he felt the TQM program would prove to be beneficial to his division. He surmised 97 percent of the employees in the print shop have cooperated with the program. In referencing the Special Projects budget category, Mr. Bailey stated the funds were requested to cover four seasonal employees and overtime pay during the legislative session. At this time, the division has three additional employees working. Mr. Bailey noted funds in this category could be adjusted downward since an additional employee was not hired. He stated he would provide the committee with the adjusted figure. Printing Office Equipment Purchase - Page 507 Mr. Bailey explained the budget allows the printing division to accumulate reserves for major equipment replacement. Senator Raggio pointed out there were no funds placed in the budget for 1992 or 1993. Mr. Bailey said the new rate structure should allow the division to properly fund the budget. Senator Raggio asked if the lack of funding for replacement equipment would cause a problem in production setbacks. Mr. Bailey replied in the negative. Senator Raggio questioned if the division would have to finance equipment because of the lack of funds. Mr. Bailey explained the division will be transferring "from Fiscal Year 1996, $216,000 forward and in the year 1997, $295,000 forward. That is after spending, if you so agree upon, this equipment that is in the request." Records Management - Micrographics - Page 509 Mr. Bailey stated a request has been made to transfer the budget into the Department of Museums, Library and Arts. The request was made because the actual tracking and maintenance of hard copy records are maintained by the archivist and the state library. Senator Raggio asked what would happen to equipment and positions if the transfer took place. Mr. Bailey said the positions and equipment would be transferred to the library system. The equipment is presently set up in the basement of the State Library and the printing division has been paying rent to the library for the space. Mr. Comeaux interjected the move also involves the Secretary of State's Office. He noted one position and some equipment would be transferred into the budget. Senator Raggio requested assurance from the budget director that the position transfers would not cost the state any more money. Mr. Comeaux stated he did not believe costs would be higher, but he would verify it for the committee. Senator Jacobsen questioned if any agencies are doing their own printing. Mr. Bailey replied the prison system and the university system have small print shops operating. Senator Jacobsen further inquired if the print shop employees were notified of the audit's findings. Mr. Bailey explained the audit results were discussed at the weekly management meeting and at the monthly plant meeting. Motor Pool - Page 519 Tracy Raxter, Chief, Administrative Services Division, Department of Administration, came forward and provided a brief overview of the budget. The State Motor Pool operates three facilities: one in Carson City, one in Reno, and one in Las Vegas. The primary objectives of the State Motor Pool are to provide a safe, economical, and reliable means of transportation for state employees. Because of a recent reevaluation of the division's rate structure, a change is recommended which would be revenue neutral. The change requires separation of fixed and variable costs. In the future, every user of the State Motor Pool will be levied a per mileage charge. Currently, the rate structure allows for a 50 mile minimum on daily vehicles and an 800 mile minimum on monthly vehicles. Agencies have not been utilizing monthly vehicles past the 800 mile minimum because of the additional costs charged to them. This situation results in an inefficient utilization of these vehicles. Senator Raggio inquired as to how the motor pool determined the 12 cents per mile cost. Mr. Raxter stated fixed costs were separated from variable costs and then divided into the total estimated mileage which would be incurred over a year's time. The division maintains the 12 cents per mile charge should be revenue neutral. Senator Rawson asked how the new policy, in regard to costs, compares to the old rate structure. Mr. Raxter explained overall the change is revenue neutral, but certain agencies will pay more and others will pay less. Senator Raggio questioned what the reimbursement rate is for the use of private vehicles. Mr. Raxter replied 27 cents. Senator Rawson asked if this is a fair rate to pay for private vehicle use when insurance, maintenance, and depreciation are taken into consideration. Mr. Comeaux stated his office has not done any calculations on the subject. Senator Rawson interjected there should be some investigation done on the issue to determine if 27 cents is a fair and reasonable reimbursement rate. Mr. Raxter continued with his review of the State Motor Pool budget. He noted the motor pool is requesting a Program Assistant I position. At this time, the agency has only two clerical positions and problems occur when a clerical employee has to take leave time. A garage service worker is brought into the front office to cover for the clerical worker, which in turn causes disruption in the garage service operations. In addition, the agency is requesting the clerical position to provide administrative support in operating a new automated vehicle reservation and requisition system. Senator Raggio inquired if the half-time student position would still be needed if the new position was filled. Lyn Callison, Accountant Technician III, Administrative Services Division, Department of Administration, responded the agency would still keep the student position because the garage is open from 7 a.m. until 7 p.m. Mr. Raxter stated the agency is requesting funding for a new automated paper-less requisition system. The $125,000 request would be paid to the Department of Information Systems for their effort in designing, developing and implementing the new system. Currently, they are manually entering requisitions which involves a two-step process. The new system would reduce the procedure to a one-step process, thereby, reducing the chance of errors. It would also allow customer agencies on-line access to the agency's vehicle reservation system. Presently, reservations are taken over the phone and manually entered on a calendar. Automation of the process would result in better utilization of vehicles. Senator O'Donnell asked why the new system's costs are so high. Mr. Raxter responded the Department of Information Services (DIS) did a needs assessment study based on what has been requested. The $125,000 figure was suggested by the DIS. The DIS proposal included an off the shelf program. Lyn Callison interjected the funds would be used to buy communication packages for both the Las Vegas and Reno facilities and expansion of their network in the Carson City facility. Currently, the agency has five personal computers, a laser printer, and a dot matrix printer. Senator Raggio requested that Senator O'Donnell meet with Mr. Raxter regarding the equipment funding request. Senator Jacobsen asked which agencies operate outside of the motor pool. Lyn Callison responded the DMV&PS does not use motor pool vehicles, but they do utilize the motor pool's maintenance program. Agencies owning their own vehicles can contract with the motor pool for vehicle maintenance services. Senator Jacobsen stated he felt there is a need for an equipment pool. Each agency could contact the equipment pool when special equipment is needed. Senator Raggio asserted Senator Jacobson's idea has merit. He asked Mr. Comeaux "if there was any place in state government where somebody knows where this kind of equipment is, at any given time?" Mr. Comeaux replied he is not aware of any type of tracking procedure utilized presently. He noted it would be productive to establish a heavy equipment inventory by location. Interdepartmental agreements could be used to lend the equipment out on a cost reimbursement basis. Motor Pool Vehicle Purchase - Page 525 Mr. Raxter stated the budget derives its revenue from three sources: vehicle depreciation, vehicle sales, and General Fund appropriations. The budget account is requesting the replacement of 46 vehicles the first year of the biennium and 73 vehicles in the second year. The request is in addition to the one-shot appropriation request. The one-shot request would cover the purchase of an additional 84 vehicles. The State Motor Pool requested 10 of the vehicles and the remainder were requested by various state agencies. Senator Raggio asked Mr. Comeaux to research which vehicles of the 74 requested by the agencies would be replacements and which ones would be additional vehicles. Mr. Comeaux replied he would look into the matter. Senator Raggio questioned how a need for the vehicles is determined. Mr. Raxter said the 10 vehicles requested by the motor pool was determined by the number of rental requests the motor pool received. Requests for vehicles has steadily increased, especially in the Las Vegas area. The vehicles requested by the motor pool will all be alternative fuel vehicles. Senator Raggio noted the National Energy Policy Act of 1992 required federal agencies, state agencies, and businesses to increase their number of alternatively fueled vehicles. The legislation requires a 10 percent increase in the number of new alternatively fueled vehicles by 1996 and a 15 percent increase in 1997. The senator questioned if this is still a requirement of the federal government. Mr. Raxter replied in the affirmative and stated Chapter 46 of the Nevada Administrative Code addresses Senator Raggio's concerns. The code outlines the percentages required for each fiscal year from 1995-2000, regarding what percentages of new acquisitions must be alternative fuel vehicles. Senator Raggio asked Mr. Comeaux to consult with the Attorney General's Office and let the committee know what is mandated by federal law and state statute on the issue. Senator Coffin noted the taxicab companies in Las Vegas have successfully utilized alternative fueled vehicles for several years. Senator Raggio inquired what policies have been implemented on the issue of vehicle home storage. Mr. Comeaux replied the Department of Administration last summer drafted a proposed change to the section of the State Administrative Manual dealing with home storage of state vehicles. The proposed changes were adopted by the State Board of Examiners in the fall of 1994. Many of the criteria in the old regulations were retained, but they tried to make the requirements stricter. One major change in the policy was giving authorization for home vehicle storage to agency directors instead of the Department of Administration. The agency directors are required to submit a report once a year to the Department of Administration explaining their reasons why a vehicle needs to be stored at an employee's home. Purchasing - Page 527 Thomas L. Tatro, Administrator, Purchasing Division, Department of Administration, came forward and noted he and Debra Meizel, Program Chief, Purchasing Division, Department of Administration, would be presenting four budgets today. Mr. Tatro indicated he would provide a brief overview of the Purchasing Division's activities over the last 2 years. He noted the division has made the following changes: (1) decreased staffing by 42 percent; (2) privatized central storage operation; (3) privatized property sales; (4) increased direct purchasing authority to the state agencies; (5) privatized bid distribution; and (6) established an informational newsletter. The division is developing an on-line invoicing system so companies can bill them electronically. Purchase orders will be generated without any manual intervention. The Department of Informational Services is developing the software package for the program and should have it completed by next month. He stated the division conducted a satisfaction survey (Exhibit D) which indicated an 89 percent favorable response rating. An internal training program has also been developed to ensure that all employees are fully trained in their positions. In addition, same day service is being provided for items on contract. Mr. Tatro noted the division has met all of its performance indicators. He explained the number of transactions have dropped because of all the changes listed above. The division's dollar level of activity has increased, while its transaction level has decreased. The Reno warehouse is being transferred to the Buildings and Grounds Division because the Purchasing Division is no longer the primary user of the facility. The food distribution program and the federal surplus property program are still located at the warehouse. The Purchasing Division has leased 12,000 sq. ft. of the building to Washoe County. In addition, the Las Vegas warehouse has been transferred to the Commodity Food Program. He noted one major change in the budget is the removal of line-item costs from the Purchasing Division's budget to the food distribution budget because the food program is the primary user of the facility. A second major change in the Purchasing Division's budget is in the category of State Cost Allocation. In the current biennium, the division is paying $199,000 per fiscal year for State Cost Allocation and the cost increases to $445,000 per fiscal year in the next biennium. Senator Raggio asked why there was such a large increase in the category of State Cost Allocation. Mr. Tatro explained: The cost allocation plan is based . . . in part on the number of transactions that are recorded against each agency through the controller's office and the treasurer's office. A study is conducted to bill back to each of the agencies for the administrative costs of providing services. Mr. Tatro noted the division had previously utilized inmate labor, but the Department of Prisons has indicated inmate labor would no longer be available. The division will be using inmate labor funds to contract with the Retired Senior Volunteer Program for assistance with office duties. Senator O'Donnell asked for an explanation of the automated billing program. Mr. Tatro explained, presently, the Purchasing Division is billed for merchandise ordered by an agency, the division then manually prepares a billing document for the agency. The division receives from 300-400 bills a week, which have to be sorted and processed. The new program would allow for the billing information to be transmitted electronically. Senator O'Donnell stated the Committee on Government Affairs has a bill dealing with increasing the threshold of state contracts and items that can be purchased "off the shelf." Mr. Tatro stated the Purchasing Division has requested Assembly Bill (A.B.) 39 which addresses the "threshold" issue. ASSEMBLY BILL 39: Revises provisions governing state purchasing. Mr. Tatro stated the division is asking for the threshold amount to be increased to $25,000 which would be equal to the bidding threshold for Washoe and Clark County. Mr. Tatro explained before the threshold figures are increased, the division wants to provide internal training and establish standardized purchase order documents for the agencies. These steps will protect the state and provide some standardization as to how a purchase is conducted, so the agencies take advantage of all their protections under the law. Senator O'Donnell asked if the division still required its current personnel, since it had downsized and threshold amounts might be increased. Mr. Tatro explained if there were further workload decreases, then staff could be decreased, but at this time, it would be a hardship to reduce staff. Senator Raggio commended Mr. Tatro and his staff for the diligence and commitment they have shown in their reorganizational efforts. The senator asked if agencies are allowed to make their own purchases. Mr. Tatro said the division has changed the State Administrative Manual regulations regarding purchasing to require four levels of authorization instead of 33 . The agencies are now allowed to purchase anything less than $500 which is not under contract. Senator Raggio questioned if a problem still existed regarding prompt vendor payment. Mr. Tatro replied the division has assigned an employee to handle the problem. The employee is in constant contact with the agencies to ensure the division receives prompt payment from them, so the division can in turn pay the vendor. Senator Coffin requested Mr. Tatro to explain how the survey (Exhibit D) was devised. Mr. Tatro said the Department of Personnel supplied the division with a list of all agency administrators and a survey was sent out with a cover letter to each administrator on the list. The cover letter asked the administrators to give an honest evaluation of the division's performance, so the division could measure their effectiveness and identify areas needing improvement. The survey did not ask for the respondents' identities. The division proposes to survey the agencies three times a year. Mr. Tatro noted the survey findings between the Reno and Las Vegas area were very similar. Senator Coffin observed the survey indicates the agencies do not want the Purchasing Division conducting their internal inventories. He asked Mr. Tatro for an explanation. Mr. Tatro replied many agency administrators maintained it is their responsibility to perform physical inventories. The senator pointed out, since the 1993 Legislature gave the agencies more purchasing power authority, then the Purchasing Division should have the final authority over internal inventories. Commodity Food Program - Page 533 Ms. Meizel testified the food distribution program receives commodities from the United States Department of Agriculture under numerous legislative acts. The purpose of the program is to aid the American farmer, reduce surpluses, provide price support for the food market, and supply nutritious commodities to schools, senior sites and low income households. In 1994, the program distributed approximately 11 million pounds of food with a value of $4.7 million. Revenues are generated through an assessment fee charged on a per case delivery basis. In addition, the food program receives three federal grants which represents 8-10 percent of the budget. Fifty-three percent of the budget represents a pass-through cost for the purchasing and processing of foods for school districts. The distribution cost in Fiscal Year (FY) 1994 was $.057 per pound and an increase of $.01 per pound is expected in FY 1996. Ms. Meizel stated the food program is requesting authorization to purchase a 48 foot refrigerated trailer. Seventy- five percent of the trailer would be paid for by federal funds and the food program would pay the additional 25 percent. The trailer purchase would enable the food program to distribute 2,000 more pounds per run. The new trailer would replace the 40 foot 1979 trailer, which will be converted into a cool box and permanently located at the Reno warehouse. A 1500 square foot cooler at the warehouse will be converted into a freezer. The extra freezer space is needed because the federal government supplies the program with 22 percent more frozen food, versus dry food. Senator Raggio questioned if federal approval had been received for the purchase of the new trailer. Ms. Meizel explained the request was made 2 years ago and has been included in the federal government's capital expenditure plan. If the food program does not receive the federal funds, then other options would have to be considered. Senator Jacobsen asked if the Surplus Property program has access to a refrigerated truck. Ms. Meizel said the food program has contacted Surplus Property, but a truck has never been located. Purchasing - Equipment - 539 Ms. Meizel explained the budget accumulates reserves and equipment replacements for the food distribution budget. It also contains prior year funds from the Purchasing Division's budget for replacement of office equipment in the Purchasing Division. Ms. Meizel pointed out all the replacement equipment requested in the budget is for the Commodity Food Program except for one fax machine, one laser printer, and six ergonomic chairs, which were requested by the Purchasing Division. Senator O'Donnell interjected: I would like to bring the committee's attention to the difference between the two budgets. In purchasing, there was $125,000 for $50,000 in equipment and that was for about five terminals. The same agency is buying five computers, a fax machine, and a laser printer and their budget is only $23,000. Ms. Meizel stated the food distribution program is requesting five microcomputers, cabling, a fax modem, five chairs, and three work stations. The program's existing equipment was purchased "back in the eighties" and does not have sufficient memory. Presently, five employees share one computer terminal. Surplus Property - Page 542 Ms. Meizel stated the program is operated out of the Reno warehouse. The program is responsible for acquiring and transferring donated federal surplus property received from the United State General Services Administration, to eligible nonprofit agencies. The performance indicators measured an actual distribution administrative cost of 5.63 percent for FY 1994. The adjusted base budget represents continued funding for the store manager and other program expenses. Senator Jacobsen asked if a list of surplus equipment was distributed to state agencies. Ms. Meizel said because the budget has limited funds and staff, the surplus equipment was reported in the Purchasing Division's quarterly newsletter. She distributed a list of statewide federal surplus property transfers for FY 1994 (Exhibit E) and noted the list is only a partial listing of all the property transferred. Senator Rawson asked if the items on the list were purchased in-state or if the program has the capability of going out-of-state for items. Ms. Meizel responded, "The screening is done at Nellis Air Force Base and different bases in California and Utah." Senator Rawson requested a copy of the Purchasing Division's quarterly newsletter. Ms. Meizel pointed out the budget is requesting funds for one half-time Program Assistant II position. She noted a Program Assistant II position was deleted in FY 1994 along with a half-time Store Keeper IV position. Ms. Meizel said it is difficult to handle screening activities and public relations without adequate clerical help. During the last biennium, the program has relied on intermittent help, which is not always cost effective. Senator Jacobsen questioned if a "want" list is kept by the agency. Ms. Meizel explained a new software package was implemented last biennium which tracks agency requests. Administrative Services - Page 578 Mr. Raxter stated the Administrative Services Division provides administrative support to other divisions in the areas of: personnel, accounts payable, accounts receivable, financial reporting, billing, budgeting, contract administration, and management analysis. In addition to these services, the division also provides fiscal and personnel services to the office of the Governor, office of the Lieutenant Governor, and the Ethics Commission. The budget is funded by an administrative assessment fee charged to each of the divisions in the department and to any other agencies which need their services. Two positions were eliminated in the adjusted based budget during the current biennium due to the reorganization of the Executive Branch. Mr. Raxter explained Enhancement 125 provides funding for upgrading and computer networking for the division's existing computer system. The division is requesting five additional computers and upgrades on seven computer systems. Because the division is paper intensive, funding is being requested for an "automated vouchering expense data base system." The system would allow vendor payment processing and information for financial reporting. Senator Rawson inquired as to where the two eliminated positions would be indicated in the budget. Mr. Raxter replied the information is listed on page 580 of the budget under the category of Positions. Senator Jacobsen asked what procedure was followed for the disposal of old equipment once an agency had received replacement equipment. Mr. Raxter explained the agencies are required to fill out a property inventory report which would then be submitted to the Surplus Property program. The Surplus Property program makes an assessment of the property and determines if another agency could use the equipment or if it should be "junked." There being no further business to come before the committee, Senator Raggio adjourned the meeting at 10:30 a.m. RESPECTFULLY SUBMITTED: Pamela Jochim, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance January 24, 1995 Page