An Audit Report on Compliance with Benefits Proportional by Fund Requirements at Selected State Entities
September 2010
Report Number 11-005
Overall Conclusion
In fiscal year 2009, state agencies and higher education institutions generally complied with the requirement to report employee benefit expenses proportionately to funding sources to the Office of the Comptroller of Public Accounts (Comptroller). The requirements to pay benefits proportionately to funding sources were set forth on page IX-27, Section 6.08, of the General Appropriations Act (80th Legislature) and in the Comptroller's Accounting Policy Statement (APS) 011.
To comply with APS 011 requirements, 177 agencies and higher education institutions were required to submit a Benefits Proportional by Fund Report or a single source letter. State entities can file a single source letter instead of a Benefits Proportional by Fund Report if they are funded from a single fund and that fund does not include federal funds. Of the 177 state entities, 160 (90.4 percent) submitted the reports or letters by the required due date.
According to the Comptroller, state entities reported that they charged a net total of $16.9 million in estimated additional benefit expenses to the General Revenue Fund for fiscal year 2009 as a result of their Benefits Proportional by Fund Report calculations.
Throughout the fiscal year, state entities pay employee benefit expenses such as Social Security contributions, group insurance, and retirement using the funds from which the employees' salaries are paid. To comply with the General Appropriations Act, page IX-27 , Section 6.08, state entities must submit a Benefits Proportional by Fund Report to the Comptroller each November that determines whether benefit expenses should be reallocated among different funds, such as General Revenue, Dedicated General Revenue, federal funds, or other funds (including higher education institution local funds).
To determine what adjustments need to be made to achieve proportionality, agencies and higher education institutions complete a worksheet that lists (1) the percentage of total funding that each funding source represents, (2) how much each funding source has paid in benefit expenditures throughout the year, and (3) how much each funding source should pay in benefit expenditures to cover its necessary percentage of total benefits-related expenditures.
The State Auditor's Office audited the accuracy of four agencies' fiscal year 2009 Benefits Proportional by Fund Reports. Each of the agencies submitted its report by the required due date, and only one agency made proportionality adjustments incorrectly. However, auditors identified inconsistencies among the agencies in how each agency prepared its report. Specifically, the agencies differed in how they compiled funding sources, compiled benefit expense amounts, and excluded funds from their proportionality calculations.
The Comptroller has previously clarified the proportionality requirements in APS 011. However, state entities still encounter conflicting requirements among laws, rules, and federal restrictions that make it difficult for them to accurately comply with the proportionality requirements. For example, agencies and higher education institutions may violate riders in the General Appropriations Act, U.S. Office of Management and Budget Circular A-87, and certain General Revenue-dedicated funds requirements by allocating benefit expenses based on a funding proportionality calculation, rather than on actual allowable expenses for each funding source.
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