A Report on the Delegation of Authority to State Entities to Contract for External Audit Services
Report Number 16-015
To provide you with more information regarding the amount of audit work being performed related to state government, the State Auditor's Office has compiled the following data on delegations of authority to contract for audit services. State agencies and higher education institutions (state entities) must request approval from the State Auditor's Office to contract for audit-related services. The State Auditor's Office is responsible for reviewing and approving state entities' delegation of authority requests in accordance with Texas Government Code, Section 321.020. From September 1, 2014, through August 31, 2015, the State Auditor's Office received and approved 118 delegation of authority requests from 65 state entities.
Some delegations of authority included a request for more than one project, the majority of which were for audit services. The 118 delegation of authority requests included 133 projects with an estimated total cost exceeding $53.0 million, as reported by the state entities in their delegation of authority requests.
The delegation of authority requests are classified in the following three categories:
Financial audits: Financial audits include (1) financial statement opinion audits for which the primary purpose is to provide an opinion on whether the auditee's financial statements are presented fairly in all material aspects in conformity with generally accepted accounting principles and (2) financial-related audits that can entail various scopes of work.
Internal audit services: Those services are associated with state entities that do not have an internal audit department but are required to have an internal audit function under Texas Government Code, Section 2102.004. In those instances, a state entity requests the authority to outsource the internal audit function. This category also includes requests from state entities that have an internal audit department but may not have the required resources or required expertise to perform a particular audit.
Other services: Those services include performance and compliance audits. They also include other engagements, such as attestations (mostly client and auditor agreed-upon procedures), and consulting services.
Of the 133 projects included in the 118 delegation of authority requests reviewed, 60 (45.11 percent) were for financial audits, 26 (19.55 percent) were for internal audit services, and 47 (35.34 percent) were for other services.
In addition, 10 state entities accounted for 67 (50.38 percent) of the 133 requested projects.
Texas Government Code, Section 2102.0091, and the State Auditor's Office's delegation of authority approval process require state entities to submit the final audit report to the State Auditor's Office. Of the 133 requested projects, the State Auditor's Office had received reports for 83 projects (62.41 percent) as of December 18, 2015. State entities also reported that 49 (36.84 percent) projects were ongoing or had not yet started. A request for 1 (0.75 percent) delegation of authority resulted in a contract; however, no audit work was performed under that contract.
The table in the attachment summarizes the delegation of authority requests the State Auditor's Office received from September 1, 2014, through August 31, 2015.
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