August 20, 1997
Members of the Legislative Audit Committee:
The Railroad Commission of Texas (Commission) has made progress in addressing
recommendations contained in An Audit Report on Management Controls at the Texas Railroad
Commission (SAO Report No. 96-032, February 1996). During our follow-up review, we identified
other actions management should consider to further improve specific processes or to more fully
address the recommendations in the above report.
Our review of prior-audit findings were only for those issues we felt had the greatest impact on the
overall efficiency and effectiveness of the Commission in regulating natural resources, ensuring
community safety, and promoting economic development. The most significant, but not all, audit
issues have been addressed, as discussed in the attached table.
The attached table summarizes the current status of our recommendations for the most significant
audit issues. It also includes the Commissioners’ responses to our audit follow-up and additional
recommendations.
We thank the Commission for its assistance and cooperation. If you have any questions, please call
Barnie Gilmore at 479-4785.
Sincerely,
Lawrence F. Alwin, CPA
State Auditor
kob/rmn
Attachment
cc:
Mr. Charles R. Matthews, Chairman
Mr. Barry Williamson, Commissioner
Ms. Carole Keeton Rylander, Commissioner
Mr. Mike Regan, CPA, Chief Financial Officer
SAO Report No. 97-083

Railroad Commission of Texas
Status of Selected Prior-Audit Recommendations
Management’s
Management’s
Responses
Responses to
Follow-Up Audit
to Follow-Up Audit
Previous
Previous
Results and New
Results and New
Recommendations
Recommendations
Status
Recommendations
Recommendations
Planning and Evaluation (continued)
Data evaluation in two
The Commission
inspection programs
concurs. There are
were specifically
new improvements to
mentioned in our
the current process
finding: oil and gas
which will be
and liquid-petroleum-
completed by
gas inspections. A
10/01/97 (new Oracle-
system of tracking and
based DO system will
evaluating oil and gas
replace the current
inspection data has
Rbase system).
been implemented,
and a system to ensure
100 percent coverage
of high-risk liquid-
petroleum-gas
installations has been
implemented.
Complete a formal
The Computer
In The
Information
The Commission
project management
Services Division
Progress
Technology Services
concurs.
plan for the computer
intends to complete
Division has been
architecture change.
these formal project
reorganized and there
management plans
has been a high
by the end of FY 1996.
turnover of top-level
personnel, with up to a
50 percent vacancy
rate in key areas.
Staffing issues,
therefore, have taken
precedence over
project planning. The
Division plans to submit
a formal project
management plan to
the Commissioners
(August 1997) and to
the Department of
Information Resources
(September 1997).
A FOLLOW-UP TO THE MANAGEMENT CONTROL AUDIT
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AT THE RAILROAD COMMISSION
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Railroad Commission of Texas
Status of Selected Prior-Audit Recommendations
Management’s
Management’s
Responses
Responses to
Follow-Up Audit
to Follow-Up Audit
Previous
Previous
Results and New
Results and New
Recommendations
Recommendations
Status
Recommendations
Recommendations
Administrative Processes
Controls over administrative processes should be strengthened.
Implement
The Finance and
In
The Finance and
The Commission
recommendations
Accounting Division is
Progress
Administration Division
concurs. In respect to
made in an internal
in the process of
has implemented and
an updated
audit report of August
revising cash receipts
documented new
procedures manual for
1994 concerning
procedure manuals to
controls over receipt of
Cash Receipts, that
controls over receipt of
include the
revenue in the
effort should be
revenue.
recommendations
mailroom, but no other
completed by the end
Approximately $30.5
that were highlighted
controls have been
of November 1997. We
million or 83 percent of
in the Internal
implemented. The
are also going to be
Commission revenue is
Auditor’s Report. All
cash-receipts system is
looking at software
received and
procedures will be
a large, 30-year-old
being used by other
processed through its
reviewed to ensure
system that is still being
agencies later this
mailroom and cashier.
there is a separation
documented in order
year. Should those
of duties, and that
to reassess the entire
systems prove to be
deposits are made in
process.
cost effective for our
a timely manner.
area of application, a
change could be
made prior to fiscal
year 1998. All
recommended
controls over receipt of
revenue should be in
place by February
1998.
Determine the
The Commission
Resolved The Finance and
cost/benefit of
agrees with the
Administration Division
implementing Treasury
recommendation.
looked into the issue,
lock-box procedures
but decided lock-
for collection of
boxes were not
selected program fees
feasible.
Recommendation:
The Commission
We recommend that
concurs, and will revisit
the Commission revisit
the issue in early 1998.
the issue due to lack of
fully documented
controls over cash
receipts.
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AT THE RAILROAD COMMISSION
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Railroad Commission of Texas
Status of Selected Prior-Audit Recommendations
Management’s
Management’s
Responses
Responses to
Follow-Up Audit
to Follow-Up Audit
Previous
Previous
Results and New
Results and New
Recommendations
Recommendations
Status
Recommendations
Recommendations
Administrative Processes (continued)
Continue to evaluate
Upon receipt of the
In
The Gas Research
The Commission
management of the oil
Radian feasibility
Progress
Institute (GRI) hired
concurs.
and gas records.
study, and after the
Radian Corporation to
appointment of the
review the various
Continue efforts to
new Records
management issues
become current on
Administrator, the Oil
concerning the oil and
converting its paper
and Gas Division will
gas records. Radian
records to micro-
complete the
outlined the value of
format.
updating of its records
the records to industry
retention plan. This
and the economy and
Ensure that the Radian
plan will lay the
estimated the cost of
study addresses all oil
groundwork for
converting the records
and gas records, as
finalizing the disaster
to electronic format to
outlined in its Scope of
recovery plan and
be $9.9 million.
Work.
provide the added
level of security
Following a one-year
These documents are
Strengthen access
needed to more
moratorium on filming
being processed and
controls to require that
completely safeguard
records due to the
filed on a daily basis.
all records remain on
these documents.
Radian study, which
All records are
the premises.
was published in
available to customers.
February 1996, filming
The backlog is in
Continue to develop a
has resumed.
converting these
records retention plan
Microfilming at the
readily accessible
and a disaster
current rate, however,
documents to micro-
recovery plan.
will not eliminate the
format.
15-year backlog. Ways
in which to finance the
conversion of records
through advanced
technology (scanning)
is under study by the
Commission.
The Radian report
The Commission
addressed all oil and
concurs.
gas records as outlined
in its Scope of Work.
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AT THE RAILROAD COMMISSION
AUGUST 1997

Railroad Commission of Texas
Status of Selected Prior-Audit Recommendations
Management’s
Management’s
Responses
Responses to
Follow-Up Audit
to Follow-Up Audit
Previous
Previous
Results and New
Results and New
Recommendations
Recommendations
Status
Recommendations
Recommendations
Administrative Processes (continued)
Recommendation:
The Oil and Gas
We recommend that
Division has a few
the Commission
lockers available for
consider requiring users
customers. Space
to store their personal
reductions and need
items in a locker when
to redirect available
accessing Commission
staff to perform other
documents. This is
critical job duties has
standard procedure
reduced our ability to
where valuable and
monitor access to
irreplaceable historical
these lockers. Instead,
documents are
the common area was
involved.
implemented, which
improved visibility and
limited potential for loss
to occur. We will
continue to monitor
and recommend other
methods to safeguard
records.
Establish objective
The well-plugging staff
Resolved The well-plugging staff
The Commission
criteria for evaluating
will develop
has developed criteria
concurs.
well-plugging
“objective criteria” for
for contractor
contractors and
evaluating contractor
performance, and the
establish performance
performance. By
standards and criteria
standards to be used
September 1, 1996,
have been
by field staff for
the performance
incorporated into the
evaluating well
standards and criteria
evaluation and
pluggings.
should be ready for
awarding of contracts
incorporation into the
since December 1996.
process of evaluating
and awarding
plugging contracts.
Include performance
In
New contracts that
The Commission
standards, sanctions,
Progress
include performance
concurs. New contract
and criteria for
standards, sanctions,
forms/approaches
termination in well-
and criteria for
were completed
plugging contracts.
termination will be
August 1, 1997, and are
completed by
being used.1
September 1997.
Our fieldwork ended prior to August 1; therefore, this has not been verified.
1
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