Summary of Report 03-013

December 2002

Report Number 03-013

Our review of regional planning commissions' (RPC) financial audit reports and associated management letters indicates that significant financial and federal compliance weaknesses exist at 13 of the 24 RPCs. In fiscal year 2001, these 13 RPCs received $20.8 million in state funds and $249.6 million in federal funds to administer a variety of programs. The financial weaknesses identified spanned a variety of areas and included issues such as failure to implement adequate controls over cash, failure to account for fixed assets adequately, and failure to monitor subrecipients that receive grant funds. Although the RPCs' independent auditors identified these weaknesses in business processes, they also reported that, with the exception of Permian Basin Regional Planning Commission, the RPCs' financial statements fairly presented their financial positions.

Performance reports that RPCs are required to submit to the State often do not include all information required by law and regulation. In addition, the required reports lack certain information that could improve state officials' ability to provide effective oversight. For example, most RPCs do not report the planned impact of their programs' activities on their regions or the actual outcomes of those activities.
In fiscal year 2001, the 24 RPCs in Texas received $48.1 million in state funds and $394.6 million in federal funds. It is critical that the State monitor the financial operations, federal compliance, and performance results of RPCs so that it can ensure that these organizations use state and federal funds efficiently and effectively.

Significant financial and federal compliance weaknesses exist at 13 of the 24 RPCs.

The most significant financial and federal compliance weaknesses identified demonstrate a need for RPCs to place greater emphasis on proper financial and grant management. These weaknesses significantly increase the risk that RPCs may not detect or correct misstatements in their financial accounts, that clients may not receive adequate program services, and that RPCs may lose federal funds as a result of noncompliance. Examples of the most significant financial weaknesses include the following:

• The Permian Basin Regional Planning Commission did not fairly present its financial position because it did not include financial information relating to its Employee Retirement Plan and Trust in its audited financial statements as required by accounting standards. Additionally, this RPC did not perform certain accounting reconciliations, including cash reconciliations, that are necessary to ensure the accuracy of financial records. This RPC also did not monitor its grant subrecipients for its $5.9 million child care program.
  
  
• NORTEX Regional Planning Commission received a qualified opinion on its compliance with federal regulations because one of its component units did not perform fiscal monitoring of its $3.9 million third-party child care service provider. Prolonged noncompliance with federal regulations could put this RPC's and that component's ability to continue receiving federal funds at risk.
  
  
• Ark-Tex Council of Government made erroneous accounting entries to its fund equity accounts and was not following true fund accounting procedures. Additionally, this RPC did not maintain a detailed listing of fixed assets or perform a recent, complete physical inventory of fixed assets.
  
  
• Central Texas Council of Governments did not have a formal comprehensive disaster recovery plan, and it did not prepare its financial statements in a timely manner. Additionally, this RPC did not have a separate audit of its fiscal year 2000 financial statements.
  
  
• Middle Rio Grande Development Council charged expenditures to the wrong grant year because of weaknesses in its controls over grant accounting.
  

The Detailed Results section and Appendix 2 of this report include additional detailed information on RPCs and their significant financial and federal compliance weaknesses.

The content of the performance reports that RPCs submit could be enhanced significantly.

Frequently, RPCs do not include key, required information in their performance reports, such as productivity data, executive directors' salaries, program goals, objectives, and performance measures. In addition, requiring additional information regarding program goals and actual performance would improve the State's ability to provide effective oversight.

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