Summary of Report 04-033

May 2004

Report Number 04-033

Overall, state agencies, universities, and community college districts fully or substantially complied with the Public Funds Investment Act (Act). In addition, universities and community college districts fully or substantially complied with higher education investment reporting requirements mandated by Rider 5 in the General Appropriations Act (78th Legislature, page III-257). With $16.5 billion in investments as of August 31, 2003, it is important that these entities comply with statutes and investment reporting requirements designed to help the Legislature, the entities' boards, and the general public ensure that entities manage and disclose their investments appropriately. The following describes compliance by type of entity for fiscal year 2003.

• Agencies. The 10 state agencies subject to the Act continued to report full or substantial compliance with the Act.
  
• Universities. The 15 universities subject to the Act continued to report full or substantial compliance with the Act and with higher education investment reporting requirements.
  
• Community college districts. All 50 community college districts reported full or substantial compliance with the Act. In addition, 49 of them were in full or substantial compliance with higher education investment reporting requirements. One community college district, Coastal Bend College, failed to post its investment reports, policy, and other required disclosures on its Web site.

As the Act requires, state agencies, universities, and community college districts reported that they had not purchased certain high-risk investments (specific types of derivatives) and that they had invested their funds only in authorized investment asset classes. They reported having only $91,000 in derivatives as of August 31, 2003, compared with more than $9 million in derivatives as of August 31, 2001 (the last reporting date).

Community college districts and some universities experienced difficulties in meeting the higher education investment reporting requirements, particularly the requirements to post information on their Web sites. Community college districts also had difficulties obtaining from their auditors the required assurances regarding their compliance with the Act. However, after we contacted them, community college districts obtained the appropriate assurances and posted most of the required information on their Web sites. Universities also posted most of their remaining investment information after we contacted them.

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