A Performance Audit
An Audit Report on Incentive Compensation at the Permanent School Fund, General Land Office, Teacher Retirement System, and Employees Retirement System
August 2019
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 2018.
The Employees Retirement System (ERS) calculated and paid incentive compensation in accordance with most of its policies and procedures for plan year 2018. However, ERS should strengthen controls over its calculation and review process.
The Permanent School Fund Division (PSF Division) of the Texas Education Agency calculated and paid incentive compensation for its plan year ending September 30, 2018, in accordance with its policies and procedures. The PSF Division awarded a total of $3,805,469 in incentive compensation to 48 employees. The PSF Division awarded the most incentive compensation to its chief investment officer, who was awarded $297,574 payable during a three-year period. That $297,574 represented 7.8 percent of the $3,805,469 in total incentive compensation that PSF Division awarded.
The General Land Office (GLO) calculated and paid incentive compensation for its plan year ending June 30, 2018, in accordance with its policies and procedures. GLO awarded a total of $478,521 in incentive compensation to five employees. GLO awarded the most incentive compensation to its chief investment officer, who was awarded $276,816 payable during a two-year period. That $276,816 represented 57.8 percent of the $478,521 in total incentive compensation that GLO awarded.
The Teacher Retirement System (TRS) calculated and paid incentive compensation for its plan year ending September 30, 2018, in accordance with its policies and procedures.
TRS awarded a total of $8,745,710 in incentive compensation to 144 employees (excluding $102,081 awarded to the executive director as part of the separate executive performance incentive pay plan). TRS awarded the most incentive compensation to a senior managing director, who was awarded $294,006 payable during a two-year period. That $294,006 represented 3.4 percent of $8,745,710 in total incentive compensation that TRS awarded.
TRS calculated and paid executive incentive compensation for its plan years ending June 30, 2018 (leadership award), and September 30, 2018 (investment oversight award), in accordance with its executive performance incentive pay plan (executive plan).
The executive director’s award for plan year 2018 was composed of a leadership award of $49,117 and an investment oversight award of $52,964, for a total award of $102,081 in incentive compensation. The TRS executive director was the only executive plan participant for the plan year.
The Employees Retirement System (ERS) calculated and paid incentive compensation for its plan year ending August 31, 2018, in accordance with most of its policies and procedures. However, ERS should strengthen controls over its calculation and review process to ensure that it uses accurate performance data in its calculations. ERS should also develop and implement a process to consistently communicate and document the approval of changes it makes to its performance calculation methodologies.
ERS awarded a total of $5,148,363 in incentive compensation to 76 employees. ERS awarded the most incentive compensation to its chief investment officer, who was awarded $361,297 payable during a three-year period. That $361,297 represented 7.0 percent of the $5,148,363 in total incentive compensation that ERS awarded. In addition, members of the ERS board of trustees approved the executive director to participate in the incentive compensation plan for plan year 2018.
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