An Audit Report on the State Treasury, the Treasury Safekeeping Trust Company, and the Texas Guaranteed Tuition Plan at the Office of the Comptroller of Public Accounts
July 2005
Report Number 05-044
Overall Conclusion
Treasury Operations, a division within the Office of the Comptroller of Public Accounts (Comptroller's Office) processes warrants, checks, and electronic funds transfers accurately and in a timely manner. In addition, Treasury Operations and the Comptroller's wholly owned Texas Treasury Safekeeping Trust Company (Trust Company) produce reasonable investment returns for the Treasury Pool.
However, as we reported in 2003, the Trust Company's implementation of certain recommendations that the State Auditor's Office made in 2001 continues to remain dependent on the implementation of new financial accounting and investment accounting systems. The Trust Company has fully corrected material weaknesses that its external auditor identified in 2003.
The Trust Company values unclaimed securities accurately. Properly valuing these securities and selling them at an appropriate time is important because of the impact this has on the State's General Revenue fund. However, not all of the unclaimed securities that were eligible for sale were sold during fiscal year 2004. As of August 31, 2004, unclaimed securities valued at approximately $88.2 million were eligible for sale; the Trust Company sold $31 million worth of unclaimed securities, leaving approximately $57.2 million still available for sale. To ensure that the maximum transfer can be made to General Revenue, the Comptroller's Office should consider selling all unclaimed securities when they become eligible for sale. As of May 1, 2005, the value of all unclaimed securities (excluding mutual funds and book entry securities) totaled $159.7 million; of that amount, $130.5 million of those unclaimed securities were eligible for sale.
The Trust Company also should not sell unclaimed securities for which a claim is pending. In three instances, the Trust Company sold unclaimed securities for which a claim was pending. It later repurchased those securities and returned them to their owners. This represented noncompliance with the Trust Company's policy, which states that, if the unclaimed property has been sold, the owner shall receive the cash proceeds from the liquidation. This also represented a financial loss to the State because the repurchase costs exceeded the original sales proceeds by $70,562.
The Texas Guaranteed Tuition Plan (Plan), a prepaid tuition program administered by the Comptroller's Office, has fully or substantially implemented prior recommendations that the State Auditor's Office made in areas such as expanding sensitivity testing in actuarial reports and monitoring investment performance. However, the Plan's financial health has not improved significantly since the 2003 audit. The Plan is guaranteed by the State; therefore, if its financial health does not improve, the State will eventually be required to contribute funds to the Plan.
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