An Audit Report on Selected Funds and Financial Transactions at the Commission on the Arts
May 2010
Report Number 10-029
Overall Conclusion
The Commission on the Arts (Commission) did not adequately manage the Cultural Endowment Fund (Endowment) to ensure that all funds were deposited and withdrawn appropriately and that adequate documentation was retained for the Endowment.
Complete documentation related to the Endowment's financial transactions was not available for 1993 through 2003. As a result, auditors cannot provide assurance that all funds were correctly deposited into and expended from the Endowment account. Because of the lack of documentation, auditors made various assumptions to determine the amounts stated in this audit report and recalculated Endowment transactions and account activity from September 1, 1993, through December 1, 2009, using available bank records, data from the Uniform Statewide Accounting System, available donation documents, Commission meeting minutes, and information from the Commission's contracted fund-raiser.
Auditors identified errors in three primary areas-deposits, withdrawals, and refunds/transfers-that result in approximately $2.0 million not accounted for in the Endowment fund. Specifically:
- Deposits - Auditors calculated that the Commission should have deposited $1.0 million more into the Endowment account than it did. The Commission should have deposited approximately $13.9 million into the Endowment account from September 1, 1993, through December 1, 2009, according to the General Appropriations Act and donation restrictions contained in donor letters and agreements. However, Endowment bank account statements show that the Commission deposited only $12.9 million during this time frame. A portion of this $1.0 million gap consisted of $487,500 in donations intended for the Endowment that the Commission's contracted fund-raiser withheld from the Commission. Because the Commission did not enforce its contract with the contracted fund-raiser and ensure that it received these donations, the Endowment also did not earn potential interest and earnings on the donated funds.
- Withdrawals - Based on auditors' calculations, the Commission withdrew approximately $1.5 million more in interest and earnings from the Endowment account between September 1993 and December 2009 than it should have withdrawn because it did not comply with the restrictions in Texas Government Code, Sections 444.026 (c) and (e).
- Refunds/Transfers - Auditors calculated that the Commission should have transferred and refunded $2.0 million more to donors, the Commission's Operating Fund, and/or the Commission's contracted fund-raiser than it did upon the Endowment's dissolution. The Commission transferred and refunded $8.7 million; auditors calculated that refunds and transfers should have totaled $10.7 million.
The Commission did not maintain appropriate documentation for the Endowment. The Commission did not have endowment agreements for all of the donors. Additionally, the Commission did not maintain adequate levels of financial documentation to track funds deposited and withdrawn from the Endowment.
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