Transfer the Texas Surplus Property Agency to the General Services Commission

The Texas Surplus Property Agency should be transferred to the General Services Commission. This transfer will reduce duplication between the agencies, provide better service to state and federal property customers, and provide the federal surplus property pro gram access to necessary functions.


Background
There are two state agencies responsible for the distribution of surplus personal property. The Texas Surplus Property Agency (TSPA) is responsible for the fair and equitable disposition, through donation, o f all surplus federal personal property pursuant to the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 484 amended). The General Services Commission (GSC) is responsible for establishing and maintaining procedures for the transfer, sal e or disposal of surplus and salvage property no longer needed by state agencies as authorized by Article 9 of Art. 601b, V.T.C.S.

TSPA became a permanent state agency in 1971, with federal oversight by the U.S. General Services Administration. The respon sibilities of this agency are to locate usable federal surplus property; distribute the property fairly; donate the property but charge enough through handling fees to support the program; and check to see the property is actually put to a public use. 1~ TSPA provides property to all state agencies, local units of government, and eligible nonprofit educational or public health institutions. Statutorily, the agency is allowed to assess fees related to the acquisition, warehousing, distribution, or transfer of the property. The agency charges a fee of approximately 10 percent of the original government acquisition cost of the property to cover the warehousing and servicing of the property. These fees are deposited into the Surplus Property Service Charge Fund ( 570) for the normal operations of the agency.

State agencies are required to notify GSC of available surplus property. If the property is not transferred to another agency and GSC determines it will not satisfy a state need, it will facilitate the sale of state surplus property either through auction or sealed-bid sale, or allow the agency to auction or sell the property. If GSC facilitates the sale or auction, the purchaser is charged a 2.5-percent fee, which is deposited directly to general revenue. GSC recovers the cost of advertising and auctioneering services by deducting it from the proceeds of the sale. The costs are deposited to GSC appropriations and the difference is returned to the agency that owned the property.

There are many duplicated functi ons between the two agencies, especially in administration. Each agency has the following administrative responsibilities: accounting and preparing financial reports; budgeting and preparing Legislative Appropriations Requests; payroll processing; personne l matters including EEO issues, employee benefits and evaluations; data processing; warehouse operations; purchasing; and mail services. These and other functions are described below.

Each agency is governed by a board. TSPA is governed by a ten-member board which includes the chair of the GSC. GSC is governed by a six-member board. Considerable staff time can be spent providing administrative support to boards.

Each agency produces and distributes a publication of available surplus property. GSC produces a monthly publication from information provided by state agencies. TSPA s publication is compiled from property available in their warehouses. Both publications have overlapping customer bases.

TSPA maintains five offices in the state, an administrative office and district warehouse in San Antonio and district warehouses in Fort Worth, Lubbock and Houston. These warehouses are owned by the agency. GSC s warehouse and administrative office is located in Austin. State agencies may use the GSC warehouse to store surplus property but most agencies warehouse their own property. State agencies can also contract with TSPA for warehousing and disposition of surplus state property.

TSPA had a staff of 57 in 1992. 2~ GSC has 1.75 FTEs devoted to surplus property, but other divisions are affected by surplus property including the warehouse, purchasing, bid tabulation, mailroom, accounting, data processing and reproduction. 3~

There are currently two inventory systems of record for state and federal surplus property. One is maintained by TSPA and one is maintained by GSC (responsibility for the state inventory system will transfer to the Comptroller s office on September 1, 1993). The state personal property inventory system is being modified and will be included in the Uniform Statewide Accounting System (USAS). Ninety-two state agencies use GSC s State Property Inventory System and 162 agencies use their own systems to track personal property. 4~ Neither inventory system contains information about the other s available property.

TSPA lacks several critical functions including internal audit and legal services, while GSC maintains both. By combining these two agencies, the federal surplus program will be provided access to these important functions.

According to the 1991 State Auditor Report of Selected Federal Activities , TSPA has critical operation problems. Management responses indicate that, from the fees generated, they are unable to fund critical functions such as internal auditing which is required for federal compliance, and legal services which is crucial for inte rpretation of federal regulations (TSPA relies on legal interpretations from the U.S. General Services Administration). The internal audit function provides an independent review of agency operations an d is required for federal compliance. Additionally, TSPA is unable to provide cross-training and separation of duties due to a limited staff. Staff turnover resulted in a finding regarding property utilization requirements. All federal property agencies mu st ensure the property is being used as intended for 12 to 18 months prior to the transfer of ownership. Compliance monitoring is a major charge of this agency; however, the agency may not be fulfilling this charge to the extent required by federal regulat ion. Interpretations by the agency of Attorney General opinions have resulted in the General Revenue Fund not being reimbursed for over $1 million in Workers Compensation and Teacher Retirement System benefits paid to employees. The agency can and should recover these indirect costs through the fees charged for the property. The State Auditor also determined approximately $27 million in questioned costs were due to the lack of monitoring sub-recipients for compliance with federal regulations. The federal g overnment could require the state to pay back up to $6.8 million (or 25 percent) of these costs. The inability to resolve these and other critical operations issues may ultimately result in the state losing the federal surplus property system. 5 ~

The state and federal surplus property functions are administered by one agency in all states but Texas, usually under a state Department of Administration or General Services. 6~ Several states including North Dakota, Minnesota, Florida, California, Utah, and Massa chusetts were contacted about their property functions. While operations are different in each state, all indicated the benefits of having the functions combined. Minnesota combined their state and federal functions in 1986, resulting in better utilization of space and personnel, reduction of duplicated functions, and enhanced customer service since the customer base is almost identical. 7~ California realized a great savings by consolidating down to two state distribution sites. Each has one receiving area, one warehouse area, one customer area and one accounting system which provides one trail of accountability. Administrative staffs were consolidated and eventually pared down. 8~


Recommendations
A. The Texas Surplus Property Agency (TSPA) should be abolished and its functions should be transferred to the General Services Commission effective September 1, 1993.

The administrative functions of TSPA should be moved to Austin and co-located with GSC.

Federal surplus property accounting and inventory should be added to the Fixed Asset System in Uniform Statewide Accounting System (USAS). The property management responsibilities should be transferred from the Comptroller s office to the General Services Commission upon completion of the fixed asset system. Technologies should be explored to provide surplus information to customers electronically.

The four district warehouses should be left operational and state property should be transferred to them as needed for sale and distribution. As recommended in the 1992 report by the Texas Performance Review on the General Services Commission, the executive director of GSC should evaluate agency needs for warehousing and pursue savings through consolidating warehousing for state surplus property. 9

The executive director of GSC should contact other states to determine best practices for administering and operating the combined functions.

B. Statutory clarification is needed regarding TSPA s responsibility for reimbursing the state for retirement benefits.

As recommended in the State Auditor s 1991 Report, the executive director of GSC should obtain legal clarification of sections 825.406 and 825.407 of the Government Code to address the issue of whether the federal activity is required to contribute to the Teacher Retirement System and to reimburse the General Revenue Fund for retirement benefits paid for fiscal 1977 through 1993. 10 ~ The executive director should ensure that, upon transfer to GSC, retirement contributions to the Employees Retirement System are recovered through fees and reimbursed to the General Revenue Fund.

C. The General Revenue Fund should be reimbursed for all workers compensation payments from fiscal 1987 to the present.

As recommended in the State Auditor s Report for 1991, the executive director should ensure that, upon transfer to GSC, the General Revenue Fund is reimbursed for workers compensation payments. 11 ~ This should include back payments for fiscal 1987-93 and all future payments. These indirect costs should be recovered through fees and reimbursed to the General Revenue Fund. The obligations for fiscal years 1987 to 1992 should be recovered and reimbursed to the General Revenue Fund over the next five years.

D. The executive director of the GSC should study the opportunity for the state surplus property function to be self-supporting through the recovery of fees.

The study with a plan for becoming self-supporting should be reported to the 74th Legislature.


Implications
By combining TSPA with GSC, TSPA would derive great benef it from having access to established functions, with funding only as necessary, to include internal audit and legal services. Implementation of this recommendation will provide for cross-training and separation of duties not currently being addressed. With access to existing GSC staff, management could ensure that the proper controls are in place and provide oversight for operation of the Federal Surplus Property program. Access to GSC staff that can facilitate the monitoring function would ensure complianc e and continued existence of the program.

If state and federal surplus property inventories are combined in the USAS inventory system, customers would be provided with a centralized database, from which lists of available surplus property could be derived, reducing publication costs of two documen ts. A centralized database will facilitate both state and federal audit functions.

Customers of the state and federal programs would benefit from state surplus property being available in the federal property warehouses.

It will be very critical for GSC to perform time and cost accounting to ensure all costs are being properly allocated and reimbursed, and the fees charged are appropriate and sufficient to pay for the direct and indirect costs of both the state and federal functions.


Fiscal Impact
Under Article V, Section 57 of the General Appropriations Act, all state agencies are required to reimburse the General Revenue Fund for workers compensation payments. The TSPA has been in the General Appropriations Act since fiscal year 1987; therefore, all payments since fiscal 1987 can be recovered. According to the 1991 State Auditor Report of Selected Federal Activities , the General Revenue Fund reimbursement for fiscal 1987-91 is $110,594. 12~ Payments for fiscal 1992 are $46,344, for a total of $156,938 for years 1987-92. 13~ It is recommended this obligation be recovered, and the General Revenue Fund be reimbursed, over the next five years. The Auditor s report also addresses reimbursement for retirement contribu tions for fiscal 1977-91. The reimbursement period goes back to 1977 when the federal oversight changed from the Department of Health, Education and Welfare to the General Services Administration. School districts in the agency customer base were joined by state agencies. As the state was receiving benefit from the donation program, the auditor s office justified recommending reimbursement of the General Revenue Fund for retirement contributions from this time forward. 14~ Retirement contributions for that time period were $878,225 according to the report. 15~ Once legal status is clarified, recovering the amount of the contributions also exists. However, the General Revenue Fund must be reimbursed for the retirement contributions. The reimbursement amount for retirement contributions for future fiscal years is not possible as the staff cannot be predicted. Additional savings would be realized by reducing the duplicated functions of purchasing, data processing, agency budgeting and accounting, personnel service s, mail receipt and distribution and reproduction of publications.

Fiscal Gain to General Change
Year Revenue Fund 001 in FTEs

1994 $31,000 0
1995 31,000 0
1996 31,000 0
1997 31,000 0
1998 31,000 0



Endnotes
1 Texas Sunset Advisory Commission, Staff Evaluation-Texas Surplus Property Agency (Austin, Texas, March 1988), p. 10.
2 Texas Surplus Property Agency, 1992 Annual Financial Report (San Antonio, Texas, December 1992), pp. 15-16.
3 Telephone interview with Marilyn Grimm, General Services Commission, State of Texas, December 1992.
4 Mike Hay, Property Management (Austin, Texas, November 1992), p. 1.
5 Office of the State Auditor (SAO), Report to Management on the Examination of Selected Federal Activities for the Fiscal Year Ended August 31, 1992 (Austin, Texas, April 1992).
6 Telephone interview with Linda Engmann, President of National Association of State Agencies for Surplus Property, North Dakota, November 1992.
7 Telephone interview with Jon Schaefer, Manager, Materials Services and Distribution, Department of Administration, State of Minnesota, December 1992.
8 Telephone interview with Gerald Smith, Director, State Agency for Surplus Property, Department of General Services, State of California, December 1992.
9 Comptroller of Public Accounts, Texas Performance Review, General Services Commission Performance Review (Austin, Texas, October 30, 1992), p. 37.
10 SAO, Report to Management on the Examination of Selected Federal Activities for the Fiscal Year Ended August 31, 1992, p. 11.
11 Ibid., p. 8.
12 Ibid.
13 Texas Attorney General s Office, Worker s Compensation Division, Quarterly Claims Expense Summary for Period 09/01/91 to 08/31/92.
14 Telephone interview with Janet Reynolds, Office of the State Auditor, State of Texas, December 1992.
15 SAO, Report to Management on the Examination of Selected Federal Activities for the Fiscal Year Ended August 31, 1992, p. 10.