The Texas State Auditor’s office has published an audit report noting several key aspects of the administration of the State's Major Events Trust Fund (METF), both before and after a major event occurs, should be strengthened to help ensure accountability for METF funds.

The scope of the audit covers the period while METF has been administered by the Office of the Comptroller of Public Accounts between fiscal year 2010 and January 2015. Since Sept. 1 of this year the administration of the METF moved to the Office of the Governor. The report provides an overview and recommends enhancements to statutes; recommends that the METF should improve processes for estimating incremental tax receipt increases, seek authority to recoup funds, and review certified out-of-sate attendance; and that the METF have a consistent disbursement process. Those recommendations are detailed below.

Overview and Enhancements to Statutes
The Legislature should consider:

  • Strengthening the effectiveness of attendance certifications and post-event studies by:
    • As a condition of participation in the METF, requiring local governments, local organizing committees, and private entities involved in major events to provide to the METF attendance data and supporting documentation, as well as the detailed methodology that they used to determine the number of out-of-state attendees for attendance certifications.
    • Requiring the METF to (1) review and approve local governments’ and local organizing committees’ methodologies for calculating certified out-of-state attendance as a condition of participation and (2) review the supporting information for local governments’ and local organizing committees’ calculations of certified out-of-state attendance.
    • Requiring the METF to (1) publish a comparison of certified out-ofstate attendance with the estimated attendance numbers it used to estimate the incremental tax receipt increase, (2) publish the methodology used to obtain and review those numbers, and (3) report that information to the Legislature.
    • Requiring that the METF (1) incorporate other data into its post-event studies such as out-of-state attendance data and (2) submit a report to the Legislature regarding the results of the post-event studies, including the methodology and sources used to complete those studies.
  • Clarifying the definition of an incremental tax receipt increase and whether the calculation of an incremental tax receipt increase should include the potential negative economic effects of (1) crowding out and (2) expenses associated with administering the METF.
  • Specifying whether the METF should factor in indirect and induced effects when calculating the incremental tax receipt increase for major events.
  • Defining specific expenses for which the METF will not pay, regardless of whether they are included in an event support contract.
  • Authorizing the METF to recoup funds disbursed if the incremental tax receipt increase estimate was based on erroneous information submitted by the local government or local organizing committee.
  • Requiring that applications to site selection organizations must be in writing, and requiring the METF to verify compliance with associated requirements.
  • Defining a “highly competitive” selection process, and requiring the METF to verify compliance with associated requirements.
  • Requiring the establishment of a contract between the METF and the local organizing committees and local governments.
  • Clarifying the definition of “other local funds” to specify (1) whether funds for the required local share must be provided by a local government and (2) whether local governments and local organizing committees may contribute the local share using private funds.
  • Requiring local organizing committees and local governments to retain supporting documentation related to major events in accordance with the record retention schedule for contracts of the state agency that administers the METF.

Estimating Tax Receipts, Recoup Funds, Review Out-of-State Attendance

  • Consistently follow its methodology for estimating incremental tax receipt increases, and document its rationale for deviating from that methodology.
  • Document its rationale for the amounts it uses in incremental tax receipt increase estimates, including the reasons it considered the amounts in economic impact studies to be valid and the reasons it changed any amounts from the economic impact studies.
  • Exclude items that are not taxable from its calculation of incremental tax receipt increase estimates.
  • Maintain supporting documentation for each of the tax rates it uses to estimate incremental tax receipt increases.
  • Base estimates of incremental tax receipt increases only on the tax types permitted in statute.
  • Document its rationale for calculating indirect and induced tax effects based on the entire amount of event expenses (rather than reduced amounts).
  • Determine how IMPLAN accounts for the effect of state taxes on wholesale sales of alcoholic beverages, and ensure that those taxes are not calculated as having both direct and indirect tax effects.
  • Seek authority from the Legislature to recoup funds disbursed if the incremental tax receipt increase estimate was based on erroneous information submitted by the local government or local organizing committee.
  • Review and approve local governments’ and local organizing committees’ methodologies for calculating certified out-of-state attendance in advance as a condition of participation in the METF.
  • Review supporting documentation for local governments’ and local organizing committees’ calculations of certified out-of-state attendance.
  • The METF should ensure that all employees complete required ethics training within the required time frame.

Disbursements

  • Consistently obtain and review detailed documentation for payment requests to ensure that costs are (1) associated with approved major events and (2) allowable.
  • Require local governments and local organizing committees to provide original vendor invoices when they request a disbursement from the METF.