A Performance Audit
An Audit Report on Incentive Compensation at the Permanent School Fund, General Land Office, Employees Retirement System, and Teacher Retirement System
September 2018
Summary Analysis
The Permanent School Fund Division (PSF Division) of the Texas Education Agency, the General Land Office (GLO), and the Teacher Retirement System (TRS) calculated and paid incentive compensation in accordance with their policies and procedures for plan year 2017.
The Employees Retirement System (ERS) generally calculated and paid incentive compensation in accordance with its policies and procedures for plan year 2017. However, ERS overpaid two employees a total of $3,593 because it did not calculate those employees’ incentive compensation awards in accordance with its policies and procedures.
TRS calculated and paid executive incentive compensation in accordance with its executive performance incentive pay plan, which is a separate plan from the regular incentive compensation plan discussed above. However, it should ensure that controls have been strengthened over its executive incentive compensation calculation and review process by developing detailed calculation and review procedures.
The Permanent School Fund Division (PSF Division) of the Texas Education Agency calculated and paid incentive compensation for its plan year ending September 30, 2017, in accordance with its policies and procedures. The PSF Division awarded a total of $3,577,833 in incentive compensation to 49 employees.
The General Land Office (GLO) calculated and paid incentive compensation for its plan year ending June 30, 2017, in accordance with its policies and procedures. GLO awarded a total of $312,083 in incentive compensation to five employees.
The Employees Retirement System (ERS) generally calculated and paid incentive compensation for its plan year ending August 31, 2017, in accordance with its policies and procedures. However, ERS overpaid two employees a total of $3,593 in incentive compensation because it did not apply the correct lengths of service according to its incentive compensation plan (plan) for the two employees’ calculations. ERS awarded a total of $5,300,467 in incentive compensation to 71 employees.
TRS calculated and paid incentive compensation for its plan year ending September 30, 2017, in accordance with its policies and procedures. TRS awarded a total of $9,083,202 in incentive compensation to 134 employees (excluding $16,372 awarded to the executive director as part of the separate executive performance incentive pay plan discussed in Chapter 4-B).
TRS calculated and paid executive incentive compensation for its plan year ending June 30, 2017, in accordance with its executive performance incentive pay plan (executive plan). However, TRS did not have detailed policies and procedures that document its calculation and review processes for the executive plan, which increases the risk of inaccurate incentive award payouts. That finding was originally reported in the State Auditor’s Office’s 2016 incentive compensation audit report. TRS had not addressed that prior year finding for plan year 2017 because its executive plan year ended before the release of that report. The TRS executive director was the only executive plan participant for the 2016-2017 performance period covering July 1, 2016, to June 30, 2017. TRS awarded $16,372 in incentive compensation to its executive director.
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