State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2011
Report Number 12-555
In our audit opinion dated February 21, 2012, we concluded that the basic financial statements for the State of Texas presented fairly, in all material respects, the financial position and activities of the State for the fiscal year ended August 31, 2011. The Office of the Comptroller of Public Accounts published our audit opinion as part of the Comprehensive Annual Financial Report for fiscal year 2011, which it intends to post on its Web site at http://www.window.state.tx.us/finances/pubs/cafr/.
The financial statements provide a comprehensive disclosure of the State's financial activities during the fiscal year and an overall picture of the financial position of the State at the end of the fiscal year. The State successfully contends with significant complexities in preparing its basic financial statements. Compiling financial information and ensuring its accuracy for more than 200 state agencies and higher education institutions is a major undertaking.
The financial statements convey the use of approximately $124.7 billion during the fiscal year, an increase of $4.6 billion or 3.8 percent since the prior fiscal year. The State's assets on August 31, 2011, totaled $211.9 billion, an increase of $3 billion or 1.4 percent since the prior fiscal year. However, the State's cash and cash equivalents decreased by $8.3 billion since the prior fiscal year. The State issued approximately $9.8 billion in Texas Tax and Revenue Anticipation Notes on September 1, 2011. That was an increase of approximately $2.0 billion compared with the amount of Texas Tax and Revenue Anticipation Notes the State sold in the prior fiscal year.
Auditing financial statements is not limited to reviewing the numbers in those statements. Conducting this audit also requires the State Auditor's Office to obtain a sufficient understanding of the agencies and higher education institutions and their operating environments--including obtaining an understanding of the internal controls over systems and processes that the agencies and higher education institutions use to record their financial activities--to assess the risk of material misstatement of the financial statements. Through that effort, auditors identified specific weaknesses that three agencies should correct to improve the reliability of their financial information.
The State Auditor's Office audit also included an audit of the State's Schedule of Expenditures of Federal Awards (SEFA) in relation to the Comprehensive Annual Financial Report for fiscal year 2011. The Office of the Comptroller of Public Accounts prepares the SEFA by using SEFA data from all state agencies and higher education institutions that made federal expenditures during the fiscal year. The State Auditor's Office and KPMG LLP audited the processes for preparing SEFA information at 18 agencies and 18 higher education institutions. That audit work included following up on SEFA findings identified in audits of prior fiscal years at 8 agencies and 18 higher education institutions. Auditors identified errors related to the SEFA information at three agencies and nine higher education institutions. Those errors are discussed in Chapter 2-D of this report.
The State Auditor's Office conducts this audit so that the State can comply with federal legislation (the Single Audit Act Amendments of 1996) and grant requirements to obtain an opinion regarding the fair presentation of its basic financial statements and a report on internal controls related to those statements. The results of this audit are used primarily by companies that review the State's fiscal integrity to rate state-issued bonds and by federal agencies that award grants.
The State Auditor's Office and KPMG, LLP performed the federal portion of the 2011 statewide single audit. The federal portion included a review of compliance and controls over the State's federal awards and an audit of the Schedule of Expenditures of Federal Awards.
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