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An Audit Report on Financial Processes at the Texas Public Finance Authority

May 2016

Summary Analysis

The Texas Public Finance Authority (TPFA) has generally implemented controls over its financial processes, but it should make improvements in its (1) documentation of the selection and evaluation of bond-related contracts and (2) processes for the review and approval of its payroll, travel, other expenditures, and annual financial report.

 Jump to Overall Conclusion

Auditors tested TPFA’s debt issuance process and determined that TPFA’s controls were operating effectively to help ensure that debt was issued in accordance with requirements. The processes tested were related to (1) bond issuance or refunds, (2) paying bond debt service, (3) commercial paper issuance, (4) paying commercial paper-related debt service, (5) transferring funds to and from state agencies, and (6) paying associated costs of issuance and ongoing bond administration fees.

Jump to Chapter 1-A 

Based on documentation reviewed by auditors, TPFA:

•   Complied with U.S. Internal Revenue Service requirements to appropriately make arbitrage rebate payments, when required.

•   Collected and reviewed arbitrage monitoring reports from its contractor as required by the contract terms and TPFA’s Business Operating Procedures.

Jump to Chapter 1-B 

There are no statutory requirements that TPFA must follow to select consultants on bond-related contracts. Texas Government Code, Chapter 1201, gives TPFA exclusive authority to select, contract with, and determine the basis for compensation of entities that provide legal and other services. TPFA noted that according to Title 1, Texas Administrative Code, Chapter 57, and Texas Government Code, Section 402.0212, there are specific requirements that TPFA must follow in the selection of and contracting with bond-related legal service providers. While auditors did not identify any issues indicating that TPFA selected firms that were not competent to provide the contracted services, TPFA did not implement a consistent process for evaluating similar contracting services. Auditors identified several weaknesses in TPFA’s evaluation and selection processes that diminish the accountability and transparency of its contracting process.

TPFA created a pool of firms eligible to work on transactions based on criteria identified in its request for proposals without documenting how its staff evaluated that criteria.

TPFA’s current staff recommended firms from the pools created during its 2012 and 2010 request for proposals process to its Board of Directors to provide services in fiscal year 2015 for selected bond or commercial paper transactions without documenting how the staff evaluated and selected those firms.

Jump to Chapter 2 

Auditors tested 23 employee salary transactions and 4 board member compensation transactions and determined that TPFA maintained accurate employee information in its personnel files and made payments for active employees for the correct amounts. However, for 21 (95.5 percent) of the 22 applicable employee salary transactions tested, TPFA did not approve supporting time records in accordance with its internal payroll procedures before it processed the salary transactions. As a result, time records supporting salary transactions were approved an average of 61 days after the payroll was processed in the USPS. Timely approval of time records helps to ensure that employees are paid for the actual hours worked or leave taken.

Auditors also tested all six pay actions for fiscal year 2015, which included new hires, promotions, and employee transfers from other state agencies to TPFA. Auditors determined that all six pay actions were properly approved, supported, and accurately reflected in USPS. In addition, TPFA assigned user access to USPS to appropriate personnel.

Jump to Chapter 3-A 

Travel: TPFA paid approximately $21,519 for in-state travel expenses during fiscal year 2015. For the 18 travel vouchers tested, 6 TPFA properly reimbursed travel per diem amounts in accordance with the Office of the Comptroller of Public Accounts’ travel reimbursement rates; used the correct account codes for those payments in USAS; maintained evidence that travel was for a valid business reason; and maintained supporting documentation, such as meal, lodging, and fuel receipts. TPFA also properly approved travel reimbursement for 17 (94.4 percent) of the 18 travel vouchers tested, in accordance with its internal travel policy. The one travel voucher that auditors identified as an error was missing the approval date on the voucher.

Other Expenditures: For fiscal year 2015, other TPFA operating expenditures totaled approximately $1.8 million. Those expenditures include categories such as temporary services, storage fees, and office consumables. Auditors tested 25 expenditures and determined that TPFA used the correct account codes for those payments in USAS and ensured that the payments were for the correct amounts. In addition, TPFA maintained documentation showing that it approved 21 (84.0 percent) of 25 purchase vouchers tested in accordance with its internal business operating procedures.

During fiscal year 2015, TPFA processed 7 Master Lease Purchase Program expenditures that totaled $491,751. All seven of those expenditures were adequately supported, properly approved, and accurately entered and coded in USAS.

Inventory Management: TPFA’s inventory management process properly segregated the duties of maintaining property, conducting inventory, and updating the State Property Accounting (SPA) system.

Jump to Chapter 3-B 

TPFA generally had appropriate processes and controls to help ensure that it reported selected accounts correctly on its fiscal year 2015 annual financial report. Auditors tested significant TPFA transactions and determined that the transactions were accurately recorded in USAS. In addition, in its annual financial report for fiscal year 2015, TPFA ensured that the General Revenue Fund, a fund shared by most state agencies and higher education institutions, accurately included all of TPFA’s transactions for the fiscal year reported.

However, TPFA should improve certain controls over financial reporting. TPFA uses the Office of the Comptroller of Public Accounts’ Reporting Requirements for Annual Financial Reports of State Agencies and Universities to prepare its annual financial report; however, it does not have internal policies and procedures and a documented review and approval process for the preparation of its annual financial report. As a result, auditors noted inaccuracies and inconsistencies in TPFA’s annual financial report for fiscal year 2015.

Jump to Chapter 4 

Graphics, Media, Supporting documents

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