A Performance Audit
A Report on Agencies', Higher Education Institutions', and Community Colleges' Compliance with Public Investment Reporting Requirements
May 2018
Summary Analysis
All agencies, most higher education institutions, and most community colleges subject to the Public Funds Investment Act (Act) submitted compliance audit reports that indicated they fully or substantially complied with the Act in fiscal year 2017. Those entities had approximately $87.2 billion in investment holdings as of August 31, 2017. Therefore, it is important that those entities comply with statutes and investment reporting requirements designed to help the Legislature, the entities’ boards, and the public ensure that the entities manage and disclose their investments appropriately by providing transparency to stakeholders.
Additionally, all higher education institutions and most community colleges fully complied with higher education investment reporting requirements in Rider 5, page III-249, General Appropriations Act (84th Legislature), and prescribed by the State Auditor’s Office at http://www.sao.texas.gov/InternalAudit/PublicFunds/.
It is important to note that the entities self-reported the information in this report, and the State Auditor's Office did not independently verify that information.
The 13 agencies reviewed reported investments totaling approximately $24.2 billion as of August 31, 2017. Four of those 13 agencies submitted compliance audit reports that indicated they fully complied with the Act in fiscal year 2017. Nine of those 13 agencies submitted compliance audit reports that indicated they substantially complied with the Act in fiscal year 2017.
The 17 higher education institutions subject to the Act reported investments totaling almost $2.6 billion as of August 31, 2017.
Five of those 17 higher education institutions submitted compliance audit reports that indicated they fully complied with the Act in fiscal year 2017. Eleven of those 17 higher education institutions submitted compliance audit reports that indicated they substantially complied with the Act in fiscal year 2017. One of those 17 higher education institutions, Texas Woman’s University, was minimally compliant for fiscal year 2017 based on the compliance audit report it submitted in May 2018, after the State Auditor’s Office’s extended deadline of March 20, 2018.
All 17 higher education institutions fully complied with the higher education investment reporting requirements in Rider 5, page III-249, the General Appropriations Act (84th Legislature), and as prescribed by the State Auditor’s Office.
The 50 community colleges reported investments totaling approximately $3.2 billion as of August 31, 2017.
Forty-seven community colleges submitted compliance audit reports that indicated they fully complied with the Act in fiscal year 2017. Two community colleges submitted compliance audit reports that indicated they substantially complied with the Act in fiscal year 2017. Coastal Bend College submitted a compliance audit report that indicated it minimally complied with the Act in fiscal year 2017.
Forty-eight of 50 community colleges fully complied with the higher education investment reporting requirements in Rider 5, and as prescribed by the State Auditor’s Office. Two of 50 of the community colleges substantially complied with the higher education investment reporting requirements.
According to the Act, any higher education institution that had total endowments of at least $95 million in book value as of May 1, 1995, is not subject to the Act. The Texas A&M University System, the Texas Tech University System, the University of Houston System, and the University of Texas System were not subject to the Act in fiscal year 2017 based on the criteria discussed above. For fiscal year 2017, those four university systems fully complied with the higher education investment reporting requirements in Rider 5, and as prescribed by the State Auditor’s Office. (Those university systems reported for all higher education institutions they oversee.) Those university systems reported investments totaling approximately $59.0 billion as of August 31, 2017.
The agencies, higher education institutions, and community colleges that auditors reviewed reported different types of investments as of August 31, 2017. Specifically, higher education institutions that are not subject to the Act invested differently from the other types of entities that are subject to the Act. For example:
- Agencies that are subject to the Act had 6.44 percent of their portfolios invested in “equity and other nontraditional investments,” and their portfolios included no derivative investment holdings as of August 31, 2017.
- Higher education institutions that are subject to the Act had 7.72 percent of their portfolios invested in “other nontraditional investments”, and their portfolios included only $3,130 in derivative investment holdings as of August 31, 2017.
- Community colleges that are subject to the Act had 0.51 percent of their portfolios invested in “other nontraditional investments,” and their portfolios included no derivative investment holdings as of August 31, 2017.
- Higher education institutions that are not subject to the Act had $172,092,302 in derivative investment holdings as of August 31, 2017, and 55.33 percent of their portfolios invested in “other nontraditional investments.
Appendices
Tables 11 through 13 provide information on the instances of noncompliance reported in the audit reports issued by the internal and external auditors of agencies, higher education institutions, and community colleges that are subject to the Public Funds Investment Act.
Table 14 provides the definitions of investment and deposit types.
Graphics, Media, Supporting documents