Education
An Audit Report on The Financial Statements of the Permanent School Fund for
the Fiscal Year Ended August 31, 2001
May 2002
Report Number 02-046
Overall Conclusion
In our audit report dated January 16, 2002, we concluded that the Permanent School Fund's (Fund) fiscal year 2001 financial statements are materially correct and presented in accordance with accounting principles generally accepted in the United States of America. We did not identify any instances of noncompliance with certain provisions of laws and regulations that would have a material effect on the Fund's financial statements or any material weaknesses in internal control over financial reporting.
Key Facts and Findings
- We continue to observe negative effects because of the State Board of Education's
(Board) inability to use the Fund's total return (interest, dividends, and
net capital gains) to make distributions to the Available School Fund. The
Constitution requires the Fund to distribute only interest and dividends (current
income). This distribution method puts the Board's need to earn enough interest
and dividends to generate adequate current distributions at odds with its
long-term need to earn high total return to help ensure that the Fund grows
at least as fast as inflation.
- Recent changes in the stock and energy markets affected the Fund. The August 31, 2001, value of cash and investments was $19.0 billion compared with $22.3 billion at the end of the prior fiscal year. The Fund distributed $794 million to the Available School Fund in fiscal year 2001 compared with $698 million during fiscal year 2000, which represents a 13.8 percent increase. The Fund's land endowment earned $270 million in fiscal year 2001, primarily from oil and gas interests managed by the General Land Office (GLO), compared with $186 million in fiscal year 2000, a 45.2 percent increase.
- While our audit did not identify any serious problems with the Fund's internal controls or reported financial amounts, we did note three less significant issues that we reported to TEA.
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