e-Texas e-Texassmaller smarter faster governmentDecember, 2000
Carole Keeton Rylander
Texas Comptroller of Public Accounts

Recommendations of the Texas Comptroller

Chapter 3: Government Performance

Assist Small Agencies by Consolidating Specific Administrative Functions


Texas state agencies with fewer than 100 employees face special problems in carrying out administrative support functions such as accounting and budgeting, purchasing, and human resource administration. Small agencies must perform most of the same complex administrative tasks as large agencies, but with fewer people who often must perform multiple functions, a situation that exposes small agencies to a variety of risks from poor performance. The State Council on Competitive Government should work with the Small State Agency Task Force to evaluate selected administrative functions of small agencies for possible consolidation. In addition, the state should simplify state reporting requirements for small agencies.


Small state agencies face unique problems in carrying out administrative support functions such as accounting and budgeting, information technology (IT) programming and maintenance, personnel administration, purchasing, staff training, and reporting.

These problems can be particularly severe for agencies with fewer than 100 full-time equivalent employees (FTE). Sixty-six, or about 60 percent, of the state’s executive-branch and selected judicial-branch agencies employ 100 FTEs or fewer. Almost half of these agencies have 20 or fewer FTEs (Exhibit 1).

Exhibit 1

Small Agencies by Number of Employees, Fiscal 2000

Number of Full-time Equivalent Employees
Number of Small Agencies
Percent of Small Agencies
Cumulative Percent of Small Agencies
20 or less
21 to 40
41 to 60
61 to 80
81 to 100

Source: Texas Comptroller of Public Accounts.

Small agencies must perform most of the same administrative tasks of larger agencies, but with less money and fewer personnel. Often, a single employee must handle several administrative duties such as payroll, accounting and budgeting, and purchasing. Larger agencies often have a single person, or even separate divisions, for each of these functions.

The complexity of state government and its requirements compounds this problem. State law requires all agencies to submit as many as 25 administrative reports to the state’s oversight bodies and service agencies.[1] Some reports must be submitted several times a year. Arcane rules and laws govern accounting, budgeting, purchasing, and personnel administration. Information technology programming and maintenance, both highly complex, now are essential to the efficient operation of both large and small agencies and to the delivery of the Web-based information that customers expect.

Small agencies often contract with private companies for assistance with IT, accounting and budgeting, and financial reporting.[2] In addition, the state also offers training to help state agencies cope with complex administrative support functions. The Comptroller’s office, for instance, offers training in the use of the state’s automated payroll and accounting systems and in the preparation of required annual financial reports, as well as other subjects.[3] The General Services Commission (GSC) provides training in the state’s purchasing requirements. Agency personnel must understand these requirements before GSC will approve them to make purchases through the state system.[4] Other agencies offer training on other administrative tasks.

Small agencies, moreover, face higher turnover rates than larger agencies. In fiscal 1999, the overall average turnover rate for executive and selected judicial agencies was about 22 percent. Yet agencies with fewer than 100 FTEs experienced an average turnover rate of about 23 percent, compared to 19 percent for mid-sized agencies (between 100 and 1,000 FTEs) and 18 percent for large agencies (more than 1,000 employees). Agencies with 50 FTEs or fewer had the highest turnover rates (Exhibit 2).[5]

Exhibit 2

Executive Agencies Turnover by Agency Staff Size

Number of Full-time Equivalent Employees
Number of Agencies*
Average Turnover (Fiscal 1999)**
5 or fewer
6 to 10
11 to 20
21 to 50
51 to 100
101 to 1000
More than 1000

* Excludes legislative agencies, courts, schools and universities.

** Turnover data not included for Texas Higher Education Coordinating Board, Texas Board of Law Examiners or Texas Food and Fibers Commission.

Source: State Auditor’s Office.

In a 1998 management audit of selected small state agencies, the State Auditor’s Office noted that a smaller staff makes it difficult for agencies “to maintain proper separation of duties, adequate supervision, and proficiency in all management control areas.” The audit went on to cite problems including noncompliance with human resource laws and poor personnel practices; poor controls over cash receipts, travel vouchers, fixed assets, and purchasing; and a need to improve controls over disaster recovery plans and automated information systems.[6]

The Small State Agency Task Force is a group of about 70 state agencies that have informally joined together to identify and share common concerns and work to improve their operations. Its membership consists of any state agency with about 100 FTEs or fewer.[7] Some of the task force’s concerns mirror those documented by the State Auditor’s Office, as shown in a survey of its membership conducted by the Comptroller’s office. The survey, which received a 50 percent response rate, showed that 60 percent of the respondents saw “staff being spread thin” as a serious problem, while 49 percent considered salary levels a serious problem (Exhibit 3).

Exhibit 3

Small State Agency Task Force Survey Responses: Major Problems Faced by Small Agencies

Problem Area
Percent Respondents Indicating A Serious Problem
Percent Respondents Indicating At Times a Problem
Percent Respondents Indicating No Major Difficulty
Percent Respondents Indicating No Opinion
Administrative staff “spread thin”
Salary levels

Source: Texas Comptroller of Public Accounts, July 2000.

Forty-six percent of respondents ranked IT as being significantly affected by problems such as a staff spread too thin and inadequate salaries. About 20 percent to 26 percent of respondents saw financial reporting, personnel administration, and accounting and budgeting as significantly affected by “small agency” problems (Exhibit 4).

Exhibit 4

Small State Agency Task Force Survey Responses: Impact of Small Agency Problems on Administrative Functions*

Percent Responses in Rank 1 (Significantly Affected)
in Rank 2
Percent Responses in Rank 3
Percent Responses in Rank 4
Percent Responses in Rank 5 (Less Significantly Affected)
Percent Not Responding
Information management (IT)
Financial reporting
Personnel administration
Accounting and budgeting
Cash receipts and revenue accounting

* Respondents ranked the degree to which administrative functions were affected by problems related to small agencies on a scale of one (highly affected) to five (less significantly affected).

Source: Texas Comptroller of Public Accounts.

The Texas Funeral Service Commission provides a telling example of the problems that a small agency can face because of its size. In 1999, this 15-person agency became embroiled in political controversy and lost critical staff members, including its executive director. The agency found itself unable to accomplish its regulatory functions or effectively carry out its administrative duties of state reporting, payroll, and IT maintenance. The Comptroller’s office loaned administrative personnel to run the agency and correct its administrative processes. Comptroller personnel found that the agency had overspent its budget for fiscal 1999, had not complied with some human resource requirements, and had mismanaged assets. The agency’s computer system and its licensing database, both developed by outside contractors, also needed attention. Many of the administrative problems resulted from loss of key administrative staff who had performed multiple functions.[8]

In the past, Texas state government has dealt with the administrative difficulties of small agencies in different ways. The Legislature has, for instance, combined similar small agencies under the administrative umbrella of another agency. For example, the Texas Department of Licensing and Regulation (TDLR) has absorbed the operations of a variety of smaller licensing and regulatory boards and increased their efficiency by combining separate administrative and enforcement functions.[9] Similarly, the Texas Department of Health has taken a variety of smaller agencies under its umbrella and now administers 17 separate regulatory programs.[10]

The Legislature also has promoted the co-location of agencies, allowing small and large agencies to share facilities and administrative functions. Co-located agencies can sometimes share, for example, meeting rooms, printing facilities, computer networking, and courier services. The Legislature has charged GSC with broad responsibility for overseeing office co-location and reporting on its progress each biennium.[11]

Although many locations of mid-size and large agencies are not co-located throughout the state, most of the state’s small executive and judicial agencies already are co-located with agencies of various sizes in Austin’s state leases or office buildings. About eight small agencies are good targets for co-location in the future, including the Board of Land Surveying, the Board of Private Investigators and Private Security Agencies, the Soil and Water Conservation Board, the Texas Racing Commission, the Structural Pest Control Board, the Texas Funeral Service Commission, the Texas Workers Compensation Research Center, and the Texas Cancer Council.[12] GSC evaluates these and other agencies as their leases expire to determine the feasibility of co-location.[13]

Co-location lays the groundwork for other approaches to the consolidation of small agency administrative functions. Physical proximity makes it easier for agencies to consolidate their administrative support functions through interagency contracts or group contracts with private vendors. This type of administrative consolidation allows an agency to keep its core functions and expertise while stretching its budget through shared functions.

Texas state government has not yet promoted this kind of administrative consolidation systematically, although some agencies are using this approach effectively for certain support functions.

About 20 agencies co-locate in the William P. Hobby State Office Building in Austin. More than half of these are small licensing agencies for the health professions that were co-located in the building in 1995 by legislative direction. The 1995 Legislature also created a three-person Health Professions Council to help coordinate these agencies’ activities without taking away their individual powers.

Working together, these agencies established a group contract with Ginny’s Printing and Copying for copying services in the Hobby Building. Any agency, not just one of the health professions agencies, can use this contract. The health professions agencies also have a group contract with a courier service to pick up and deposit money coming into the agencies from licensing activities. Group contracts such as these save money by avoiding duplicative equipment purchases and reduce costs by allowing agencies to buy in larger quantities. In addition, the Health Professions Council allocates one employee to the IT needs of the health professions agencies. The agencies frequently share resources and work together informally on administrative functions.[14]

Agencies co-located in the E. O. Thompson State Office Building in Austin represent another example of consolidated administrative functions. TDLR, the largest tenant in this building with more than 140 FTEs, has entered into a memorandum of understanding to provide IT services to two small agencies in the building, the Texas Veterans’ Commission and the Texas Commission on the Arts. TDLR provides these agencies with data communication links, network management, and some software support. These agencies benefit by taking advantage of TDLR’s IT expertise and computer facilities. All three agencies benefit from reduced costs by sharing data communications and personnel costs, as well as the cost of any common software or hardware. In addition, two other small agency residents, the Texas Incentive and Productivity Commission and the Fire Fighters’ Pension Commission, share communication links with TDLR, but do not share in their cost.[15]


A. State law should be amended to direct the state’s Council on Competitive Government (CCG) to review the administrative functions of small state agencies to determine the cost-effectiveness of acquiring these services through group contracts.

The CCG’s purpose is to evaluate commercially available services performed by state agencies and determine if they may be provided more cost-effectively through competition with other state agency providers or private commercial sources. The administrative functions CCG should review include information technology, budgeting, accounting, payroll, purchasing and training, and other miscellaneous contract areas.

Accurate information on the administrative costs of small agency functions is not available at this time. CCG’s analysis should help provide an objective basis for future contracting action.

To make the review manageable, CCG should review these functions as performed by small agencies in the W.C. Clements State Office Building and William P. Hobby State Office Building in Austin. The Clements building contains eight small agencies. One of these, the Department of Information Resources, is particularly skilled in IT, making it a strong contender to provide IT services to other agencies in the building. The Hobby Building contains a number of agencies ranging in size from 3 FTEs to about 40. Small agencies in the Hobby Building work together already, which should prove useful in working out additional contracting possibilities.

CCG should appoint a lead agency from each of the two buildings to help coordinate the activities of the review. The lead agency should be willing to assist in coordination and able to provide adequate personnel and experience to handle the task.

CCG should examine the IT and budgeting and accounting needs of small agencies in these buildings to determine their needs and the cost-effectiveness of meeting those needs through current practices. CCG should examine alternatives in the private sector or among other state agencies for meeting those needs more efficiently through group contracts or interagency agreements. CCG should call on the Comptroller’s office for help in determining the actual cost of IT and accounting and budgeting functions in selected agencies, using activity-based costing or other tools for evaluation. Finally, if needed, CCG should develop specifications for any outsourcing effort that it recommends. Any recommendation either must be cost-neutral or save money. Other state agencies or private businesses could bid on providing the specified service.

CCG should solicit the advice and cooperation of the Small State Agency Task Force during this review. Agencies in the review would be required to use any contract or agreement recommended by CCG.

This recommendation recognizes that other ways of consolidating administrative functions, such as agency mergers of various types, have met with opposition in the past. This approach offers an alternative that leaves small agencies intact, but forces the state to consider other creative ways of achieving administrative consolidation and greater efficiency.

B. The Legislative Budget Board, the Governor’s Office of Budget and Planning, the State Auditor’s Office, the Comptroller’s office, and the General Services Commission should work together to simplify reporting processes for small state agencies.

Staff from these offices should meet as a committee to accomplish this objective. The chair of the Small State Agency Task Force should sit ex-officio on this panel.

The Comptroller’s office should organize and initiate these meetings; however, agencies that are the primary users of information submitted in required reports should take the lead in discussions on simplified processes or the preparation of materials related to these reports. In its discussions, the group should consider reports that duplicate information required elsewhere, less frequent reporting schedules for small agencies, and simplified reporting formats.

The group should prioritize its work to consider those reports that will be required most immediately in the 2002-03 biennium first. To the extent possible, the group should implement recommendations before small agency report submissions are due. Statutory changes may be required for some reporting recommendations to be implemented. The group should report to the 2003 Legislature and Governor’s Office on any recommendations requiring statutory modification.

This recommendation should ease one of the most significant administrative burdens on small agencies. It would save staff time and allow agencies to use staff resources more efficiently.

Fiscal Impact

Consolidating the administrative support functions of small agencies would improve efficiency through the greater availability of expertise at the same or reduced cost. Better performance of administrative functions also would reduce the risk and associated costs that the state faces from poorly performed fiscal, human resource, and IT functions. Simplified reporting would save staff time. Savings from these recommendations, however, cannot be estimated.

[1] Texas Comptroller of Public Accounts, Required Reports Prepared by State Agencies and Institutions of Higher Education for the 2000-2001 Biennium (draft) (Austin, Texas, June 2000), p. 1.10.

[2] Texas Comptroller of Public Accounts, “Survey Responses: Administrative Functions of Small State Agencies,” Austin, Texas, August 10, 2000.

[3] Interview with Don Land, Texas Comptroller of Public Accounts, Austin, Texas July 21, 2000.

[4] General Services Commission, “Texas Procurement Training Program Guidelines,” August 15, 2000 (http://www.gsc.state.tx.us/stpurch/trn-cert.html). (Internet document.)

[5] Texas Comptroller of Public Accounts, “Summary of Employee Count, Executive Director Salary, and Agency Turnover Rates for Selected State Agencies,” Austin, Texas, August 15, 2000. (Computer printout.)

[6] Office of the State Auditor, 1998 Small Agency Management Control Audit (Austin, Texas, April 1998), pp. 1-3.

[7] Small State Agency Task Force, “Small State Agency Task Force Mission Statement and Operating Rules,” Austin, Texas.

[8] Interview with Mike Regan, associate deputy comptroller, and Robert Daniels, manager, Account Maintenance, Texas Comptroller of Public Accounts, Austin, Texas, June 30, 2000.

[9] Interview with Bill Kuntz, executive director, Texas Department of Licensing and Regulation, Austin, Texas, July 14, 2000.

[10] Texas Department of Health, “Professional Licensing and Certification Division,” July 22, 2000 (http://www.tdh.state.tx.us/hcqu/plc/plcd.htm). (Internet document.)

[11] Texas H.B. 2018, 75th Leg., Reg. Sess. (1997).

[12] Texas Comptroller of Public Accounts, “Small Agencies and their Co-location Status,” Austin, Texas, August 18, 2000. (Computer printout.)

[13] E-mail communication from Mike Lacy, director of Facilities Planning, General Services Commission, July 21, 2000.

[14] Interview with Wally Lankford, director of Finance, Texas Board of Medical Examiners, Austin, Texas, July 5, 2000.

[15] E-mail communication from Steven Wilkins, director of Information Services, Texas Department of Licensing and Regulation, to Bill Kuntz, executive director, Texas Department of Licensing and Regulation, July 14, 2000.

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Post Office Box 13528, Capitol Station
Austin, Texas

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