A draft internal General Land Office audit report recommends changing the unusual way it operates the Alamo.
Land Commissioner George P. Bush heard similar concerns at a Senate Finance Committee hearing in December.
It is not clear when the audit report will become public.
On Dec. 5, the state Senate Finance Committee questioned Land Commissioner George P. Bush and the agency’s general counsel, Jeff Gordon, about the three nonprofits the General Land Office had set up to manage, promote and raise money for the Alamo — each with its own mission but with identical boards made up of Bush and 10 of the state’s most recognizable movers and shakers.
What most vexed the senators was that Alamo Complex Management, the nonprofit responsible for day-to-day operations of the most iconic site in Texas, was entirely funded by public dollars but without the scrutiny and transparency that is supposed to follow those dollars.
“You probably need to look at a different way to do this. There’s too many boxes that are not open to the public and that’s a problem, especially if we are going to put tax money into it,” said Sen. Robert Nichols, R-Jacksonville, adding that the obscure workings of the Alamo boards had seeded public suspicions. “Y’all need to get ahead of this thing – and you’re behind.”
What the senators didn’t know was that three months earlier, a draft report of an internal audit of the agency’s oversight of operations at the Alamo concluded that the unorthodox use of a nonprofit to manage the site is unduly complicated and sometimes runs afoul of state requirements.
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The draft report, obtained by the American-Statesman and dated Sept. 8, recommends that the agency “reconsider the structure and funding model for Alamo operations.”
“This is an unusual situation that has created complexity and a lack of clarity regarding the nature and the use of the funds used for the Alamo operations,” the draft states.
Bush is overseeing a $450 million plan to redevelop and improve the historic site with, among other things, a new museum housed in nearby state-owned buildings and additional historic programming. It will be paid for with a mix of public money and private donations.
General Land Office spokeswoman Brittany Eck said the draft report obtained by the Statesman had been “altered.”
“This is a document that has been altered and leaked before being presented to you as authentic,” Eck said. Eck would not say how the document was altered or provide an alternative draft or final product.
According to the agency’s 2017 Internal Audit Annual Report, posted on the agency’s website, the audit report on Alamo accounting processes is marked “completed.” But its “date issued” remains “TBD” — to be determined.
“`Completed,’ only speaks to the internal audit team’s preliminary findings,” Eck said. “Management gets to respond, and may agree, disagree or have some other response to the preliminary findings. That response may be in the form of written rebuttals, or written answers of some other nature, or in the form of actions taken. That part of the audit, which is critical, is not complete – so the audit itself is not complete.”
Eck said, “The GLO proactively decided to audit the financial processes at the Alamo. The schedule of audits including the Alamo was created at the beginning of 2017 and approved by Commissioner Bush. This decision was made to overhaul the archaic financial processes that were in place since the GLO took over the Alamo, and to improve transparency for taxpayers.”
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The audit will be made public in “spring 2018,” Eck said. Bush faces a March 6 GOP primary opponent, former Land Commissioner Jerry Patterson, who has made Alamo management a centerpiece of his campaign.
“This report reads like an indictment of how the management structure of this important operation is set up,” said Sen. Kirk Watson, an Austin Democrat who serves on the Finance Committee, after examining the draft report obtained by the Statesman.
Internal auditors examined agency oversight of the Alamo from July 2015 — when Bush, in his first year in office, created Alamo Complex Management to run the Alamo, replacing the Daughters of the Republic of Texas — through the end of 2016.
“It makes you wonder who’s in charge of that operation, makes you wonder why it has been set up in such a convoluted way,” Watson told the Statesman. “It appears that the GLO has created a shadow government to spend all this state money with very little accountability and now we hear of an audit, that on the GLO’s website they call it a completed audit, but they won’t let anybody see it, so the shadow government continues to operate in the shadows.”
Alamo oversight deficient
The draft report notes that Alamo Complex Management, which has since been renamed Alamo Trust, is a “non-profit entity separate and distinct from the General Land Office,” but “uses state funds and equipment to perform its duties under a contract to operate the Alamo.” It has an operating account in a local bank from which it pays its bills. It then submits those bills to the General Land Office, which reimburses the Alamo Trust, replenishing the account.
But, the draft notes, “the current situation obscures the control of the funds. It also has created a situation where GLO is responsible for state laws over the use of funds, but with limited control since the expenditures are prior to approval by the GLO.”
The internal auditors found that sometimes Alamo Complex Management spent state funds from the operating account that were not required for the operation of the Alamo, and that sometimes the General Land Office reimbursed for those expenses, and sometimes it didn’t.
The draft recommends that the General Land Office better monitor and help Alamo Complex Management tighten up its procurement processes.
The draft states that “no evidence was found during the audit that Comptroller’s Office approval was obtained for holding money outside the Treasury.”
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The draft also found that “ACM and the GLO did not fully comply with or have systems in place to address eight of the eleven key requirements for operating the Alamo.”
The eight areas where it fell short were a written management plan, budget, prior agency approval for “major decisions” as defined in the contract, museum policy, timely submission of monthly financial documents, procurement, daily deposits into the state treasury and the timeliness of replenishment requests and payment of those requests.
The draft found that the Alamo’s operating budget for fiscal 2017 was incomplete, that the actual expenses for the director’s department were more than twice the amount budgeted through December 2016, and that there were a variety of other unbudgeted expenses.
The auditors also reported that the “GLO did not consistently check prospective contractors for conflicts of interest before executing contracts for projects or services at the Alamo,” and that was the case for two of the 10 contracts it reviewed for the audit.
The state of Texas owns the Alamo. In 2011, the Legislature placed the Alamo under the auspices of the General Land Office, which contracted with the nonprofit Daughters of the Republic of Texas to conduct daily operations. On taking office in 2015, Bush, alleging mismanagement, wrested control of the Alamo from the Daughters group.
“We went around the world to find a third-party management firm to bring a professional culture to the management of the Alamo and no one stepped forward,” Bush told the Senate Finance Committee at the December hearing. “We had a few inquiries over the course of six months, but ultimately Texans had to take on that job.”
Sen. Jane Huffman, R-Houston, asked Bush the reason for three different boards — each with different functions but with the same 11 directors: Bush, Gene Powell, Welcome Wilson Jr., Nancy Perot, Jim Dannenbaum, Jeanne Phillips, Ramona Bass, Hope Andrade, Dr. Francisco Cigarroa, Lew Moorman and Red McCombs.
“It is a little confusing even when you study it,” Huffman said of the setup.
“Legal counsel advised us to structure it that way,” Bush said. “If I had to speculate it has to do with protecting liability. We have claims against the Alamo on a daily basis, slip-and-falls, we have all kinds of incidents that happen at the Alamo.”
“We have members of our board that are wealthy and successful and they have incredible amounts of liability,” Bush said.
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The senators appeared puzzled by Bush’s explanation and, one after another, indicated they did not find it persuasive.
“I don’t really understand why the 60, now 70 employees (at the Alamo), why aren’t they just GLO state employees?” Sen. Lois Kolkhorst, R-Brenham, asked Bush.
“When I came into office my full-time employee cap was fully expended so I didn’t really have room to absorb north of 60 employees,” Bush said.
Patterson, the former land commissioner seeking to reclaim his old job, said that explanation didn’t ring true.
“We had a policy of keeping less than our (full-time equivalent) count and we used that money to essentially pay fewer people higher salaries to get more productivity,” Patterson told the American-Statesman. “We never reached our FTE max.”
What’s more, Patterson said of Bush, “within six months he had fired 100 people and bragged about it.”
What Bush wanted, Patterson said, was to be able to boast, as he does in his campaign literature, that he had “reduced the size of his office by 15% to save taxpayers millions.” Adding the Alamo employees would have ruined that narrative, even though it would not have cost the taxpayers more.
“Let’s make them GLO employees,” Kolkhorst told Bush at the hearing. “I know you don’t want to see this big bump in employees because we’re small-government Republicans, but I think this one we could explain.”
The Senate Finance Committee hearing came after Lt. Gov. Dan Patrick called for a review of funding for the Alamo.
“I want to ensure the funds allocated for the Alamo are spent to emphasize the historical impact of that legendary battle on the development of Texas as a nation and as a state,” Patrick said.
That followed a 57-1 vote in late September by the State Republican Executive Committee approving a resolution calling on Bush and the General Land Office to keep the Battle of the Alamo its central focus in redeveloping the site and also “to voluntarily commit to transparency in finances and operations of the Alamo, including the open records requests for information from nonprofit corporations engaged in the restoration and operation of the Alamo.”
Bush insisted that he is focused on the Battle of the Alamo, and, bit by bit, he has acceded on some transparency concerns.
“In terms of (public information requests), in terms of minutes and other documents within the (Alamo Complex Management), the position of legal counsel has been that it is not disclosable, which legally is correct, but I have made the decision as chairman to turn over everything,” Bush told the Statesman in October. “There’s nothing to hide.”
Huffman asked Bush at the December hearing, “Are the meetings of these various boards subject to the Open Meeting Act?”
“They are not,” Bush said.
“And why are they not?” Huffman asked.
“Because that’s just the current confines of law,” Bush said.
Watson told Bush the law does not prevent him and his boards from being more open.
“You can do it differently than what you’re doing currently. It’s your choice,” Watson said. “You can do it. You’re choosing not to do it.”
At its next meeting after the hearing, on Dec. 20, the Alamo Endowment and Alamo Trust amended their bylaws to open future meetings of the trust to the public with at least two days’ notice, short of the 72-hour notice requirement in the Texas Open Meetings Act.
The resolution also made all books and records of the trust subject to the Texas Public Information Act