Summary of Report 98-047

June 1998

Report Number 98-047

Overall Conclusion

The Texas Permanent School Fund's (Fund) financial statements and the Fund's material accounts reported by the Texas Education Agency (Agency) for fiscal year 1997 are accurately presented in all material respects, in accordance with generally accepted accounting principles. We noted certain matters involving the internal control structure and its operations that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants (AICPA).

Key Facts and Findings

The Agency and the Fund continue to have difficulty properly applying the Governmental Accounting Standards Board's (GASB) pronouncements related to financial reporting. The Agency and the Fund have relied on the Comptroller of Public Accounts and the State Auditor's Office to ensure the Agency's and the Fund's financial statements are in compliance with standards.

• The Fund initially prepared its unaudited financial statements using the AICPA Guide for Investment Companies (Guide). This Guide is not considered to be in conformance with generally accepted accounting principles for governmental entities.
• The Fund did not implement new GASB financial statement reporting and disclosure requirements for securities lending activities. In addition, it did not include all the information required by GASB for the deposit and investment note disclosure. For the third consecutive year, the Agency included information submitted by the Fund in the Agency's Annual Financial Report without ensuring that the financial statement presentation and the note disclosures were in compliance with GASB.
• The Fund's accounting and control processes are not sufficient to ensure complete and accurate financial reporting and proper recording of accruals. Two significant accounts receivable and the associated revenue and an investment purchases payable were not accurately recorded in the accounting records or accurately reported in the financial statements.

At August 31, 1997, the Fund's investments had a fair value of $15.3 billion. Income of $692.7 million was assigned to the Available School Fund for the fiscal year ended August 31, 1997.

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