Summary of Report 02-069

August 2002

Report Number 02-069

The Department of Health (Department), The University of Texas Medical Branch at Galveston (Medical Branch), and The University of Texas M.D. Anderson Cancer Center (Center) did not pay benefits proportionately to funding sources in fiscal year 2001 as the General Appropriations Act (76th Legislature) requires. Because of this, these entities reimbursed $514,340 to General Revenue based on the original Benefits Proportional by Fund Reports they submitted. As a result of our audit, the Medical Branch coordinated with the Comptroller of Public Accounts (Comptroller) to make corrections that increased the Medical Branch's reimbursement to General Revenue by $722,335. This brought the total reimbursement to General Revenue from all three entities to $1,236,675.

The Department submitted its fiscal year 2001 Benefits Proportional by Fund Report almost three months after that report's due date. It reimbursed General Revenue $96,723 approximately four months after submitting the report (during the course of our audit). However, we cannot provide full assurance about the accuracy of the $96,723 reimbursement amount because (1) the Department did not document its rationale for its proportionality calculations and (2) in a prior audit, we found weaknesses in the Department's ability to provide reliable financial information.

According to the Comptroller, two state agencies-the Texas Forest Service and the State Board for Educator Certification-did not comply with the requirement to submit Benefits Proportional by Fund Reports for fiscal year 2001. In addition, neither agency submitted its report to the State Auditor's Office. Responses from both of these agencies appear in Appendix 2.

The General Appropriations Act requires all state entities that have multiple funding sources to file Benefits Proportional by Fund Reports annually. The accuracy of these reports is critical in preventing state entities from erroneously using General Revenue to pay employee benefits. While this audit report covers three state entities, we intend to audit additional entities' compliance with this requirement as part of future audits.

The Department of Health submitted its Benefits Proportional by Fund Report almost three months after the report's due date and reimbursed $96,723 to General Revenue four months later.

The Department submitted its fiscal year 2001 Benefits Proportional by Fund Report to the Comptroller almost three months after the November 20, 2001, due date for that report. Based on the information in that report, the Department reimbursed General Revenue $96,723 in June 2002 (during the course of our audit). This was approximately four months after the Department submitted its report.

According to the Department, its delay in submitting the Benefits Proportional by Fund Report and in reimbursing General Revenue was caused, in part, by the Department's ongoing transition to a new internal accounting system. Although we did not identify any significant errors in the method-of-funding or proportionality calculations on the Department's report, we cannot provide full assurance about the accuracy of the $96,723 reimbursement amount because (1) the Department did not document its rationale for including or excluding funding amounts from its proportionality calculations and (2) in a March 2001 audit, we found weaknesses in the Department's business and financial practices that hindered its ability to provide reliable financial information.

The University of Texas Medical Branch at Galveston complied with reporting requirements, corrected errors in its Benefits Proportional by Fund Report, and made the necessary $776,240 reimbursement to General Revenue.

The Medical Branch submitted its fiscal year 2001 Benefits Proportional by Fund Report by the due date and, based on the report, reimbursed General Revenue $53,905. As a result of our audit, the Comptroller and the Medical Branch worked together to identify an omission in the information the Medical Branch specified on its Benefits Proportional by Fund Report. The Medical Branch subsequently reimbursed an additional $722,335 to General Revenue.

The University of Texas M.D. Anderson Cancer Center complied with reporting requirements and made the necessary $363,712 reimbursement to General Revenue.

The Center submitted its fiscal year 2001 Benefits Proportional by Fund Report by the due date. Our review found that the $363,712 reimbursement the Center made to General Revenue was correct.

General Appropriations Act requirements could provide enhanced guidance on how to comply with proportionality requirements.

Through our analysis and discussions with the Legislative Budget Board and the Comptroller, we became aware that the General Appropriations Act does not specifically instruct state entities in how they should factor nonappropriated, local funds into their proportionality calculations. Clarification of this area could help ensure that state entities comply with the requirements of the General Appropriations Act.

We also noted that it is possible for state entities to circumvent the requirement to submit the Benefits Proportional by Fund Report by combining multiple sources of funding into a single operating fund within General Revenue. The General Appropriations Act does not currently prohibit state entities from doing this. Clarification of this area could also help to ensure that state entities comply with the requirements of the General Appropriations Act.

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