Audit Reports Affecting Multiple Agencies
A Report on State Agencies' and Universities' Compliance With the Texas Public Funds Investment Act
Report Number 97-061
May 1997
Overall Conclusion
Based on our review of internal audit compliance reports submitted by 30 of 33 state entities subject to the Public Funds Investment Act (Act), it appears that substantial compliance was demonstrated in fiscal year 1996, the year of implementation. While 26 of these reports identified instances of noncompliance with at least one requirement of the Act, most of the entities had completed significant actions required to comply with the Act. (Figure 1 profiles the areas where noncompliance with provisions of the Act were reported.) The 33 entities held investments with a book value of nearly $6.9 billion at August 31, 1996, or almost 7 percent of the State's total investments. This includes TexPool's $4.4 billion investment portfolio.
Key Facts and Findings
Investment policies have been improved at 30 entities as a result of the Act. Substantial compliance with the Act was reported by internal auditors. However, more improvements are needed. Revisions of investment policies are needed at 12 entities, while 15 entities need improvement in management controls over the investment function. Other compliance areas in need of improvement were also noted. Additionally, three agencies did not receive the required audit.
The concentration of derivative investments in university portfolios appears to have decreased, and market values have improved slightly in relation to corresponding book values since the publication of a Briefing Report on Derivative Investments by Texas State Entities (SAO Report No. 95-035, December 1994). The decreases were due primarily to increases in total investment portfolio balances.
Enhancements to the Public Funds Investment Act were suggested by various state entities. These included establishing minimum portfolio criteria for applicability of the Act and clarifying other issues.
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