State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2010
February 2011
Report Number 11-555
Overall Conclusion
The basic financial statements presented in the Comprehensive Annual Financial Report (CAFR) for the State of Texas present fairly, in all material respects, the financial position and activities of the State for the fiscal year ended August 31, 2010. These financial statements provide a comprehensive disclosure of the State's financial activities during the fiscal year and an overall picture of the financial position of the State at the end of the fiscal year.
The State successfully contends with significant complexities in preparing its basic financial statements. Compiling financial information and ensuring its accuracy for more than 200 state agencies and higher education institutions is a major undertaking. The financial statements convey the use of more than $120.1 billion during the fiscal year.
Auditing financial statements is not limited to reviewing the numbers in those statements. Conducting this audit also requires the State Auditor's Office to obtain a sufficient understanding of the agencies and higher education institutions and their operating environments, including obtaining an understanding of the internal controls over systems and processes that the agencies and higher education institutions use to record their financial activities, in order to assess the risk of material misstatement of the financial statements. Through that effort, auditors identified specific weaknesses that four agencies and three higher education institutions should correct to improve the reliability of their financial information.
The State Auditor's Office also audited the State's Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2010, which is prepared by the Office of the Comptroller of Public Accounts (Comptroller's Office) using SEFA data from all state agencies and higher education institutions that made federal expenditures during the fiscal year. The State Auditor's Office and KPMG LLP audited the processes for preparing SEFA information at 15 agencies and 9 higher education institutions. Additionally, auditors followed up on prior year SEFA findings at 2 agencies and 15 higher education institutions. Auditors identified errors caused by inadequate review of SEFA information at 8 agencies and 18 higher education institutions. These errors are discussed in Chapter 2-I of this report.
The State Auditor's Office conducts this audit so that the State can comply with federal legislation (the Single Audit Act Amendments of 1996) and grant requirements to obtain an opinion regarding the fair presentation of its basic financial statements and a report on internal controls related to those statements. The results of this audit are used primarily by companies that review the State's fiscal integrity to rate state-issued bonds and by federal agencies that award grants.
The State Auditor's Office's opinion regarding the State's basic financial statements is published in the State of Texas Comprehensive Annual Financial Report for the Year Ended August 31, 2010, which is available on the Comptroller of Public Accounts' Web site.
The State Auditor's Office and KPMG, LLP performed the federal portion of the 2010 statewide single audit. The federal portion included a review of compliance and controls over the State's federal awards and an audit of the Schedule of Expenditures of Federal Awards. The reports from the federal portion and the financial portion are submitted to the federal government to fulfill Single Audit reporting requirements.