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An Audit Report on The State Treasury and Its Trust Company, the Texas Tomorrow Fund, and TexPool
October 2001
Report Number 02-007
Overall Conclusion
Treasury Operations (Treasury), a division within the Office of the Comptroller of Public Accounts (Comptroller), handles more than $1 trillion in financial transactions and manages more than $25 billion in investments directly and through its wholly owned Texas Treasury Safekeeping Trust Company (Trust Company). While we saw no evidence of loss or misappropriation of state assets, the fact that the Treasury does not adhere to certain significant industry standards followed by its counterparts in the private sector could increase the risk that such incidents could occur. No statute or regulation requires the Treasury to adhere to these standards.
During our audit work, we identified substantial opportunities for improvement in organizational structure, staffing, and internal controls. We brought these to the attention of the Comptroller. The Comptroller has started to implement the majority of the recommendations we made regarding these issues, and we encourage the Comptroller to continue this effort.
Key Facts and Findings
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Although the Treasury is not expressly obligated to adhere to financial industry and regulatory standards, doing so could help it maximize investment returns, improve internal controls, enhance its accounting and information system, and strengthen its monitoring efforts.
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Aspects of Trust Company oversight, policy, and investment practices need to be strengthened.
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As of August 31, 2000, the Texas Tomorrow Fund remained actuarially sound and provided the expected prepaid tuition services. However, financial risks associated with this $970 million financial institution need to be identified and addressed to ensure the Fund's viability.
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Management of the Texas Local Government Investment Pool (TexPool) has restored confidence so that the pool continues to grow. However, there are still opportunities to improve TexPool's operations.
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