A Report on the Audit of the Permanent School Fund's Fiscal Year 2004 Financial Statements
February 2005
Report Number 05-026
Overall Conclusion
In our audit report dated January 14, 2005, we concluded that the Permanent School Fund's (Fund) basic financial statements for fiscal year 2004 were materially correct and presented in accordance with accounting principles generally accepted in the United States of America.
We also issued a report on compliance and internal control over financial reporting as required by auditing standards. Our procedures were not intended to provide an opinion on compliance with laws and regulations or to provide assurance on internal control over financial reporting. However, our procedures did not identify any noncompliance with laws or regulations that materially affected the financial statements or any material weaknesses in internal control over financial reporting.
The major internal controls that we tested in the process of forming our opinion on the financial statements were generally operating effectively.
Although it is not directly related to controls over financial reporting, we identified an issue that warrants action from Texas Education Agency (Agency) management and management of the Agency's Permanent School Fund Investment Office. Specifically, Investment Office management does not have evidence that members of the State Board of Education (Board) or the Board's service providers made required annual ethics disclosures in fiscal year 2004. In addition, the Board members did not obtain required annual ethics training in fiscal year 2004. The Board members received ethics training in fiscal year 2003 and are scheduled for ethics training during the spring of 2005. This issue is discussed in Chapter 1 of the attached report.
Furthermore, Agency and Investment Office management may consider whether conducting criminal background checks on employees in certain positions will help reduce the Agency's and the Fund's risk of fraud. This issue is discussed in Chapter 2 of the attached report.
Constitutional language related to calculating the distribution to the Available School Fund is subject to interpretation. The Legislature may want to consider clarifying this language in statute. This issue is discussed in Chapter 3 of the attached report.
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