Reports on Other Entities
Financial Related Audit of Tom Green County
Report Number 95-147
Poor management controls over Tom Green County's investment function, including the lack of oversight and monitoring, allowed over 65 percent ($12.7 million) of the County's funds ($19.4 million) to be invested in long-term, high-risk collateralized mortgage obligations (CMOs), resulting in liquidity problems. County officials have indicated the need to begin liquidating these investments to meet current obligations. Actual losses that will be incurred from the liquidation cannot be estimated due to constantly changing market conditions.
As of March 31, 1995, market values reflect a $4.5 million unrealized loss for all of the County's CMO investments. Millions of dollars were invested in these volatile derivatives over a four-year period, leaving the County with a CMO portfolio consisting of 66 percent high-risk inverse floaters and 34 percent various fixed rate classes.
The construction bond funds carry a major portion of these investments. Almost 85 percent of bond proceeds issued for jail construction are invested in CMOs, resulting in an unrealized loss of approximately $3.7 million as of March 31, 1995. The potential investment losses could lead to increased costs for the jail facilities.
Tom Green County's operating budget for fiscal year 1995 is $32.4 million. The County's total population is approximately 98,400 and includes the city of San Angelo, Texas.
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