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An Audit Report on Incentive Compensation at Selected Agencies

May 2015

Report Number 15-032

Overall Conclusion

Through their incentive compensation plans for plan year 2014, the Teacher Retirement System (TRS), the Permanent School Fund (PSF) of the Texas Education Agency, and the General Land Office (GLO) awarded and paid incentive compensation awards in accordance with their policies and procedures.

While the Employees Retirement System (ERS) awarded plan year 2014 incentive compensation in accordance with its policies and procedures, it did not always pay incentive compensation accurately. Specifically, ERS did not accurately make necessary corrections to certain payment amounts to adjust for errors it had made in prior years. In addition, ERS should implement recommendations that its internal auditor made in November 2014 to strengthen plan performance goals, improve plan information that ERS provides to its board of trustees and key stakeholders, and formalize its plan review procedures.

In addition, GLO should strengthen its incentive compensation plan by formally approving its plan prior to the start of the plan performance period. The former land commissioner and the former chief clerk approved the GLO incentive compensation plan after the end of the plan performance period.

Auditors communicated other less significant issues separately in writing to management of TRS, the PSF, GLO, and ERS.

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