Summary of Report 01-555

April 2001

Report Number 01-555

In general, state agencies and universities do a good job of controlling financial resources and complying with state and federal laws and regulations. However, we found some serious exceptions.

The annual Statewide Single Audit includes procedures to ensure the accuracy of the State's annual financial report and compliance with requirements of major federal programs. The 39 federal programs audited represent 81 percent of $19.6 billion of fiscal year 2000 federal funding.

• Material weaknesses were identified in the accounting and financial reporting systems at the Texas Education Agency and the Texas Department of Health. These two agencies accounted for expenditures of approximately $22.6 billion during fiscal year 2000, which includes $7 billion in federal funds.
• Contract administration continues to be a material weakness at the Department of Housing and Community Affairs and the Texas Education Agency. Despite improvements, monitoring of contracts is still not adequate to ensure the State receives agreed-upon services. In fiscal year 2000, these two agencies paid contractors over $2.2 billion in federal funds to provide services to citizens.
  
• A material weakness continues to exist in the payroll system at Texas Southern University. There is no assurance that payroll charges to Research and Development federal programs are allowable.
• The Commission on Alcohol and Drug Abuse and the Department of Protective and Regulatory Services made significant improvements to address prior year weaknesses in contract administration.
  
• There were no findings for the Department of Transportation or the Teacher Retirement System in any of the areas tested. In addition, we had no findings for 19 of 20 agencies and universities we audited for compliance with bond covenant requirements.

The following are individual sections of the report:

1. Auditor's Report
2. Our Compliments
3. Schedule of Findings and Questioned Costs
4. Summary Schedule of Prior Audit Findings
5. Appendices

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