State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020

Summary

The State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020, SAO Report No. 21-555, dated February 2021 by the State Auditor's Office. The overall conclusion states that, in an audit opinion dated February 23, 2021, 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, 2020. The report states that the Economic Stabilization Fund balance was $11.3 billion on August 31, 2020, and that the State reported total assets of $380.4 billion, total liabilities of $250.3 billion and a net position of $117.1 billion. The Summary of Auditor's Results lists the report type as unmodified and cites finding 21-555-01.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

State Auditor’s Office reports are available on the Internet at http://www.sao.texas.gov/.

State of Texas Financial Portion of the
Statewide Single Audit Report for the
Year Ended August 31, 2020
February 2021
Report No. 21-555

Lisa R. Collier, CPA, CFE, CIDA
First Assistant State Auditor

State of Texas Financial Portion of the
Statewide Single Audit Report for the Year
Ended August 31, 2020
SAO Report No. 21-555
February 2021
This audit was conducted in accordance with Texas Government Code, Section 403.013(c), and TItle 31, United States Code, Section
7502.
For more information regarding this report, please contact Michael Clayton, Audit Manager, or Lisa Collier, First Assistant State
Auditor, at (512) 936-9500.

Overall Conclusion
In our audit opinion dated February 23, 2021, 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,
2020. The Office of the Comptroller of Public Accounts (Comptroller’s Office)
prepared the basic financial statements and published our audit opinion as part of
the Comprehensive Annual Financial Report (CAFR) for fiscal year 2020, which it
intends to post on its website at
https://comptroller.texas.gov/transparency/reports/comprehensive-annual-
financial/.
The consolidated financial statements provide
a comprehensive view 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. Compiling the
State’s consolidated financial statements is a
major undertaking; those financial statements
combine financial information for more than
200 state agencies and higher education
institutions.
Economic Stabilization Fund
On August 31, 2020, the Economic
Stabilization Fund balance was $11.3 billion.
That amount consisted primarily of $5.9
billion in cash in the State Treasury, $4.1
billion in current and non-current
investments, and $1.3 billion due from the General Revenue Fund. The General
Revenue Fund transferred $1.1 billion to the Economic Stabilization Fund in
November 2020.  The Economic Stabilization Fund is reported in the General Fund
on the governmental fund financial statements and in Governmental Activities on
the government-wide financial statements.

Basic Financial Statements
The State’s basic financial statements include
both government-wide and fund financial
statements:

Government-wide financial statements
display information about the State as a
whole, except for its fiduciary activities.

Fund financial statements for the State’s
governmental and proprietary funds
provide information on the major funds
individually and nonmajor funds in the
aggregate. Fiduciary statements include
financial information for fiduciary funds.
Source:  Governmental Accounting Standards
Board Statement No. 34, Basic Financial
Statements – and Management’s Discussion
and Analysis – for State and Local
Governments.

State of Texas Financial Portion of the Statewide Single Audit Report
for the Year Ended August 31, 2020
SAO Report No. 21-555

ii

Fiscal Year 2020 Financial Summary

As of August 31, 2020, the State reported total assets of $380.4 billion,
which primarily consisted of $159.9 billion in capital assets, $128.2 billion in
investments, and $46.7 billion in cash and cash equivalents.

As of August 31, 2020, the State reported total liabilities of $250.3 billion,
which consisted of $77.0 billion for other postemployment benefits (OPEB)
liabilities, $67.1 billion for pension liabilities, and $59.7 billion for bonds
payable liabilities.

As of August 31, 2020, the State reported a net position of $117.1 billion.
Net position is the total ending balance for the State.

The fiscal year 2020 consolidated financial statements report the use of
approximately $198.8 billion1 during the fiscal year.

The State’s Schedule of Expenditures of Federal Awards (SEFA) reported
expenditures of $95.1 billion related to federal awards.
The State is also the trustee or fiduciary for ten defined benefit plans and one
defined contribution plan. It is also responsible for other assets that can be used
only for trust beneficiaries. All state fiduciary activities are reported in separate
statements of fiduciary net position and changes in fiduciary net position. These
activities are reported separately from other financial activities because the State
cannot use the assets to finance its operations. The State’s fiduciary
responsibilities include ensuring that assets reported in those funds are used for
their intended purposes. The financial activity and balances for those fiduciary
activities are not included in the fiscal year 2020 totals listed above.
Auditing the basic 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.
The State Auditor’s Office also audited the State’s SEFA in relation to the CAFR for
fiscal year 2020 and issued an unmodified opinion. The Comptroller’s Office
prepares the SEFA by using self-reported SEFA data from all state agencies and

1 The $198.8 billion in annual expenditures exceeded the $123.6 billion appropriated for fiscal year 2020 primarily because:

Certain expenditures (such as higher education institutions’ expenditures of funds held outside the State Treasury) are included
in the Comprehensive Annual Financial Report (CAFR) but are not included in the General Appropriations Act (GAA).

The CAFR presents actual expenditures of federal funds, while the GAA presents estimated amounts for federal funds.

Additional pension and OPEB-related expenditures were recorded in the CAFR to account for the effects of the
implementation of GASB Statements Nos. 68, 71, 73, and 75 that are not included in the GAA.

State of Texas Financial Portion of the Statewide Single Audit Report
for the Year Ended August 31, 2020
SAO Report No. 21-555

iii

higher education institutions that made federal expenditures during the fiscal
year. The State Auditor’s Office and CliftonLarsonAllen LLP (CLA) audited the
processes for preparing SEFA information at 21 agencies and higher education
institutions. Auditors identified errors related to the SEFA information at nine
agencies and higher education institutions. Those errors are discussed in Chapter
2-A of this report.
As part of the audit work for SEFA, auditors performed prior-year finding follow-up
work at seven agencies and higher education institutions and determined that
recommendations for two of those findings were not yet fully implemented (see
the Summary Schedule of Prior Year Audit Findings).
The State Auditor’s Office conducts this audit so that the State can comply with
federal legislation (the Single Audit Act Amendments of 1996); state statute (Texas
Government Code, Section 403.013(c)); 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
may be used by bond-rating companies, the Legislature, and federal agencies that
award grants.
Summary of Management’s Response
At the end of certain chapters in this report, auditors made recommendations to
address the issues identified during this audit. The agencies and higher education
institutions agreed with the recommendations in this report.
Audit Objective and Scope
The audit objective was to determine whether the State’s basic financial
statements present fairly, in all material respects, the consolidated balances and
activities for the State of Texas for the fiscal year ended August 31, 2020.
The Statewide Single Audit is an annual audit for the State of Texas. It is
conducted so that the State complies with (1) the Single Audit Act Amendments of
1996 and Title 2, U.S. Code of Federal Regulations, Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards (Uniform Guidance) and (2) state statute requiring that an audited CAFR be
provided to the Governor (Texas Government Code, Section 403.013(c)).
The scope of the financial portion of the Statewide Single Audit included an audit
of the State’s basic financial statements and a review of significant controls over
financial reporting and compliance with applicable requirements.

State of Texas Financial Portion of the Statewide Single Audit Report
for the Year Ended August 31, 2020
SAO Report No. 21-555

iv

The scope of the federal compliance portion of the Statewide Single Audit included
an audit of the State’s SEFA, a review of compliance for each major program, and
a review of significant controls over federal compliance. The State Auditor’s Office
contracted with CLA to provide an opinion on compliance for each major program
and internal control over compliance. The State Auditor’s Office provided an
opinion on the State’s SEFA, in relation to its opinion on the CAFR. Information on
the federal compliance portion of the Statewide Single Audit is included in a
separate report entitled State of Texas Federal Portion of the Statewide Single
Audit Report for the Year Ended August 31, 2020, by CLA.

Contents
Independent Auditor’s Report ...................................... 1
Chapter 1
Summary of Auditor’s Results ....................................... 2
Report on Internal Control over Financial Reporting and
on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with
Government Auditing Standards .............................. 3
Schedule of Findings and Responses .............................. 6
Chapter 2
Financial Statement Findings ........................................ 7
Chapter 2-A
State Entities Should Strengthen the Preparation and
Review of Their Schedules of Expenditures of Federal
Awards ............................................................ 7
Chapter 3
Federal Award Findings and Questioned Costs .................. 18
Summary Schedule of Prior Audit Findings ..................... 19
Chapter 4
Summary Schedule of Prior Audit Findings ...................... 20
Chapter 4-A
The Texas Workforce Commission Should Strengthen
Certain Controls Over Financial Reporting ................ 22
Chapter 4-B
State Entities Should Strengthen the Preparation and
Review of Their Schedules of Expenditures of Federal
Awards .......................................................... 23
Appendices ............................................................ 33
Appendix 1
Objective, Scope, and Methodology .............................. 33
Appendix 2
Agencies and Higher Education Institutions Audited ........... 38

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 1

Independent Auditor’s
Report
State of Texas Financial Portion of the
Statewide Single Audit Report for the
Year Ended August 31, 2020

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 2
Chapter 1
Summary of Auditor’s Results
Financial Statements
1. Type of auditor’s report issued:
Unmodified
2. Internal control over financial reporting:

a. Material weakness identified?
No
b. Significant deficiencies identified not
considered to be material weaknesses?
Yes
c. Noncompliance material to financial
statements noted?
No

Federal Awards
A finding regarding the Schedule of Expenditures of Federal Awards for fiscal
year 2020 was included in Chapter 2-A of this report. All other fiscal year
2020 federal award information was issued in a separate report (see State of
Texas Federal Portion of the Statewide Single Audit Report for the Year Ended
August 31, 2020, by CLA).

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 3

Report on Internal Control over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
Independent Auditor’s Report

The Honorable Greg Abbott, Governor
The Honorable Glenn Hegar, Comptroller of Public Accounts
The Honorable Dan Patrick, Lieutenant Governor
The Honorable Dade Phelan, Speaker of the House of Representatives
and
Members of the Legislature, State of Texas

We have audited, in accordance with the auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States, the consolidated
financial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate discretely presented component units and remaining fund
information of the State of Texas as of and for the year ended August 31, 2020, and the related
notes to the consolidated financial statements, which collectively comprise the State of
Texas’s basic financial statements, and have issued our report thereon dated February 23,
2021. Our report includes a reference to other auditors who audited the financial statements
of the Department of Transportation, the Employees Retirement System, the Texas Lottery
Commission, and the University of Texas System as described in our report on the State of
Texas’s consolidated financial statements. This report does not include the results of the other
auditors’ testing of internal control over financial reporting or compliance and other matters
that are reported on separately by those other auditors.

Internal Control Over Financial Reporting

In planning and performing our audit of the consolidated financial statements, we considered
the State’s internal control over financial reporting (internal control) as a basis for designing
audit procedures that are appropriate in the circumstances for the purpose of expressing our
opinions on the consolidated financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the State’s internal control. Accordingly, we do not express an
opinion on the effectiveness of the State’s internal control.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 4

A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be
prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control that is less severe than a material
weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control
that might be material weaknesses or significant deficiencies and therefore, material
weaknesses or significant deficiencies may exist that have not been identified. Given these
limitations, during our audit we did not identify any deficiencies in internal control that we
consider to be material weaknesses. We did identify certain deficiencies in internal control
described in the accompanying schedule of findings and responses as items that we consider
to be significant deficiencies.

Summary of Findings and Responses
Agency or Higher Education Institution
Finding Numbers
Multiple agencies and higher education institutions
21-555-01

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the State’s consolidated financial
statements are free from material misstatement, we performed tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with
which could have a direct and material effect on the financial statements. However, providing
an opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government
Auditing Standards.

Auditors communicated certain issues that were not material or significant to the audit
objectives in writing to the management of audited entities.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 5
Other Work Performed by the State Auditor’s Office

We issued opinions on the following financial statements, which are consolidated into the
basic financial statements of the State of Texas:


A Report on the Audit of the Teacher Retirement System’s Fiscal Year 2020 Financial
Statements (State Auditor’s Office Report No. 21-003, November 2020).

A Report on the Audit of the Department of Housing and Community Affairs’ Fiscal
Year 2020 Financial Statements (State Auditor’s Office Report No. 21-005, December
2020).

A Report on the Audit of the Permanent School Fund’s Fiscal Year 2020 Financial
Statements (State Auditor’s Office Report No. 21-006, December 2020).
This report, insofar as it relates to the entities listed above, does not include the results of the
other auditors’ testing of internal control over financial reporting or compliance and other
matters that are reported on separately by those other auditors.

State’s Responses to Findings

The State’s responses to the findings identified in our audit are described in the accompanying
schedule of findings and responses. The State’s responses were not subjected to the auditing
procedures applied in the audit of the financial statements and, accordingly, we express no
opinion on them.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control over
financial reporting and compliance and the result of that testing, and not to provide an opinion
on the effectiveness of the State’s internal control over financial reporting or on compliance.
This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the State’s internal control over financial reporting and compliance.
Accordingly, this communication is not suitable for any other purpose.

Sincerely,

Lisa R. Collier, CPA, CFE, CIDA
First Assistant State Auditor

February 23, 2021

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 6
Schedule of Findings and
Responses
State of Texas Financial Portion of the
Statewide Single Audit Report for the
Year Ended August 31, 2020

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 7
Chapter 2
Financial Statement Findings
This chapter identifies the significant deficiencies related to the financial
statements that are required to be reported in accordance with Government
Auditing Standards. There are no significant deficiencies related to the
State’s basic financial statements, but Chapter 2-A below discusses
significant deficiencies related to the State’s Schedule of Expenditures of
Federal Awards.
Chapter 2-A
State Entities Should Strengthen the Preparation and Review of
Their Schedules of Expenditures of Federal Awards
Reference No. 21-555-01
(Prior Audit Issue 20-555-02, 19-555-01, 18-555-04, 17-555-04, 16-555-04, 15-555-05, 14-555-07, 13-555-
02, 12-555-05, 11-555-17, 10-555-26, and 09-555-19)

Type of finding: Significant Deficiency
The agencies and higher education institutions discussed
below did not appropriately prepare or adequately review
their fiscal year 2020 Schedule of Expenditures of Federal
Awards (SEFA) (see text box for additional information).
Therefore, the SEFAs that they submitted to the Office of
the Comptroller of Public Accounts (Comptroller’s Office)
contained errors.
Those agencies and higher education institutions
accounted for $43,764,732,829 in federal expenditures,
or 46 percent of the total federal expenditures that the
State of Texas reported for fiscal year 2020. The errors
listed below were not material to the fiscal year 2020
SEFA for the State of Texas or to the fiscal year 2020
Comprehensive Annual Financial Report for the State of
Texas. However, collectively, they represent control
weaknesses that could be significant to the State’s SEFA.

Department of State Health Services
The Department of State Health Services (DSHS) understated expenditures by
$51,301,233 related to the Coronavirus Relief Fund (CFDA 21.019) on its
fiscal year 2020 SEFA. That occurred because DSHS reported SEFA
expenditures based on advance payments made to vendors. DSHS should
have reported expenditures for this program based on actual expenditures
Schedule of Expenditures of Federal Awards
(SEFA)
Each state entity that expends federal awards is
required to prepare a Schedule of Expenditures of
Federal Awards (SEFA) and submit it to the Office
of the Comptroller of Public Accounts
(Comptroller’s Office). The expenditures are to be
presented in the SEFA on the same accounting basis
as each state entity’s fund financial statements.
Federal awards include federal financial assistance
and federal cost-reimbursement contracts that non-
federal entities receive directly from federal
awarding agencies or indirectly from pass-through
entities [Title 2, U.S. Code of Federal Regulations
(CFR), Section 200.38].
Federal financial assistance includes any assistance
that non-federal entities receive or administer in
the form of grants, loans, loan guarantees, non-
cash contributions or donations of property
(including donated surplus property), cooperative
agreements, interest subsidies, insurance, food
commodities, direct appropriations, and other
assistance [Title 2, CFR, Section 200.40].
Source: Reporting Requirements for Annual
Financial Reports of State Agencies and
Universities, Comptroller’s Office.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 8
incurred during fiscal year 2020.  The Coronavirus Relief Fund was a new
federal program for fiscal year 2020.
Recommendation
DSHS should strengthen its SEFA preparation and review process to help
ensure that it prepares its SEFA correctly, including reporting only
expenditures incurred during the fiscal year.
Views of Responsible Officials
DSHS acknowledges and agrees with the finding. Advanced payments is a
new tool for DSHS and its contractors as advanced payments are not typical.
This new financial method was implemented only due to the extraordinary
public health measures being used to battle the COVID-19 pandemic and the
never-before-seen volume and level of effort required to combat the virus
that continues in FY21.
Corrective Action Plan
The fiscal year 2020 SEFA is now correct. DSHS Accounting has reviewed the
underlying cause and has already implemented a process improvement for
advance payments. This process improvement will be documented in
procedures and tested for accuracy of desired outcome.
Implementation Date:
March 30, 2021
Responsible Person:
DSHS Accounting Claims Unit Manager

Texas Division of Emergency Management
The Texas Division of Emergency Management (TDEM) incorrectly classified
$100,087,455 as pass through expenditures related to one CFDA program on
its fiscal year 2020 SEFA. That occurred because TDEM miscoded select
expenditures within its accounting system. TDEM should have reported those
expenditures as direct expenditures instead of pass through expenditures.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 9
Recommendation
TDEM should strengthen its SEFA preparation and review process to help
ensure that it prepares its SEFA correctly, including classifying expenditures
appropriately by expenditure type.
Views of Responsible Officials
TDEM acknowledges and agrees with the finding. TDEM will work to develop
and implement corrective action to further improve our process.
Corrective Action Plan
TDEM will review sub-recipient anomalies with various staff to ensure correct
sub-recipient or contractor relationship is identified.
Implementation Date:
February 1, 2021
Responsible Person:
Division Chief and Section Chief - Finance

Health and Human Services Commission
On its fiscal year 2020 SEFA, the Health and Human Services Commission
(HHSC):

Incorrectly classified $16,404,999 as direct expenditures related to 10
CFDA programs. HHSC should have reported those expenditures as pass
through expenditures instead of direct expenditures.

Incorrectly classified $626,499,103 in expenditures related to 2 CFDA
programs.  Specifically, HHSC did not identify those expenditures on the
SEFA as COVID-19-related expenditures as required. New for fiscal year
2020, entities are required to identify all COVID-19-related expenditures
on their SEFAs.
Recommendation
HHSC should strengthen its SEFA preparation and review process to help
ensure that it prepares its SEFA correctly, including ensuring that it:

Classifies expenditures appropriately by expenditure type.

Identifies and reports COVID-19-related expenditures.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 10
Views of Responsible Officials
The Texas Health & Human Services Commission acknowledges and agrees
with this finding. Through analysis of the exceptions identified in the audit,
the Texas Health & Human Services Commission will develop and implement
corrective action to further improve the preparation and review processes.
Corrective Action Plan
The Texas Health & Human Services Commission has implemented significant
process enhancements in this area. The Schedule of Expenditure of Federal
Awards (SEFA) workplan will be revised to include procedures for the
attributes to be tested for each relevant compliance requirement and
coordination of an annual review with HHSC’s financial reporting specialist at
the Comptroller’s Office prior to SEFA preparation. The annual review will
ensure any applicable accounting and reporting updates are captured and
documented in HHSC’s SEFA workplan.
Implementation Date:
January 28, 2021
Responsible Persons:
Financial Analyst

Deputy Director Fund Accounting

General Land Office
The General Land Office (GLO) overstated expenditures on its fiscal year 2020
SEFA by $4,428,606 as part of the Federal Disaster Grants - Public Assistance
(Disaster Assistance) program, CFDA 97.036. That occurred because the GLO
reported prior year expenditures on its current year’s SEFA.
Recommendation
The General Land Office should strengthen its SEFA preparation and review
process to help ensure that it prepares its SEFA correctly, including reporting
expenditures in the appropriate fiscal year.
Views of Responsible Officials
The Texas General Land Office concurs with the recommendation.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 11
Corrective Action Plan
The Texas General Land Office will continue to train and develop our
professional staff to perform timely reconciliations and reviews of
expenditures and revenues for the Federal Disaster Grants – Public Assistance
(Disaster Assistance) program, CFDA 97.036 as they relate to the Schedule of
Expenditures of Federal Awards.
Implementation Date:
April 1, 2021
Responsible Person:
Sr. Director of Federal Finance, GLO-Financial
Management

The University of Texas at Austin
On its fiscal year 2020 SEFA, the University of Texas at Austin (UT Austin):

Incorrectly classified $1,479,050 in expenditures related to 5 Catalog of
Federal Domestic Assistance (CFDA) programs.  Specifically, UT Austin
classified those expenditures as part of the Research and Development
cluster of federal programs; but those expenditures were not related to
research and development and should not have been included in that
cluster of federal programs.

Incorrectly classified $56,475 in expenditures as a generic CFDA program.
Specifically, those expenditures were reported in CFDA 17.000 (U.S.
Department of Labor), but they should have been reported in CFDA
17.600 (Mine Health and Safety Grants).

Did not disclose on Note 8 to its SEFA $483,936 in Disaster Assistance
expenditures incurred in prior fiscal years as required. Specifically, UT
Austin did not have a process to identify Federal Emergency
Management Agency (FEMA) project worksheets approved in fiscal year
2020 that included expenditures incurred in prior fiscal years. As a result,
UT Austin did not report any prior year expenditures for 5 FEMA project
worksheets that were approved in fiscal year 2020 on Note 8.
Recommendation
UT Austin should strengthen its SEFA preparation and review process to help
ensure that it prepares its SEFA correctly, including ensuring that it:

Classifies expenditures in the appropriate clusters.

Reports correct CFDAs for each federal award.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 12

Reports expenditures on Note 8, when applicable.
Views of Responsible Officials
The University acknowledges and agrees with the findings. Through analysis
of the exceptions identified in the audit, the University will work to develop
and implement corrective action to further improve the processes.
Corrective Action Plan
Management is committed to improving the review processes to ensure the
SEFA submission is accurate. We will validate cluster designations to ensure
research and development expenses are appropriately accounted for in the
appropriate cluster for federal programs. Additionally, SPAA will be
conducting validation checks on new award setups monthly and conduct a
CFDA review quarterly in addition to the validations completed by
Accounting.
Implementation Date:
August 2021
Responsible Persons:
Assistant Director, Office of Sponsored Projects
Finance Manager, Accounting & Financial
Management
Views of Responsible Officials
The University acknowledges and agrees with the findings. Through analysis
of the exceptions identified in the audit, the University will work to develop
and implement corrective action to further improve the processes.
Corrective Action Plan
Management will improve validation & reconciliation processes to ensure
CFDA misclassifications do not occur. In addition, SPAA will be conducting
validation checks on new award setups monthly and conduct a CFDA review
quarterly in addition to the validations completed by Accounting.
Implementation Date:
August 2021

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 13
Responsible Persons:
Assistant Director, Office of Sponsored Projects
Finance Manager, Accounting & Financial
Management
Views of Responsible Officials
The University acknowledges and agrees with the findings. Through analysis
of the exceptions identified in the audit, the University will work to develop
and implement corrective action to further improve the processes.
Corrective Action Plan
Management will implement the Note 8 calculation procedure conducted by
the Texas State Auditor's Office within the audit to ensure proper reporting of
this expense moving forward.
Implementation Date:
August 2021
Responsible Persons:
Finance Officer, Accounting & Financial
Management
Finance Manager, Accounting & Financial
Management

University of North Texas
On its fiscal year 2020 SEFA, the University of North Texas (UNT):

Overstated the Outstanding Balance of Loans amount for 1 CFDA
program by $183,020,257 on Note 3a to its SEFA. The amount should
have been reported as repayment/adjustment activity on Note 3a.

Incorrectly excluded $169,586 in administrative costs related to 1
Student Financial Assistance CFDA program. This error occurred because
UNT did not have a process to include administrative costs related to that
CFDA on its SEFA.
Recommendation
The University of North Texas should strengthen its SEFA preparation and
review process to help ensure that it prepares its SEFA correctly, including
ensuring that it:

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 14

Reports outstanding balances correctly in the notes to its SEFA.

Reports administrative costs as required.
Views of Responsible Officials
The University of North Texas (UNT) acknowledges and agrees with the audit
findings. During the audit, it was discovered that the outstanding loans
section was incorrectly reported causing an overstatement of $183,020,257
on note 3. In addition, there was an exclusion of $169,586 of administrative
cost for student financial aid CFDA program. Upon notice of the findings, I
have executed the below action plan.
 Corrective Action Plan
UNT immediately updated processes to ensure future reporting reports
outstanding loans and administrative cost appropriately in the fiscal year.
Implementation Date:
December 16, 2020
Responsible Person:
Senior Principal Accountant

University of Houston
On its fiscal year 2020 SEFA, the University of Houston:

Overstated expenditures by $739,755 for Note 8. The overstatement
occurred because the University of Houston incorrectly included
expenditures associated with project worksheets that FEMA approved
prior to fiscal year 2020.

Misclassified $2,546,211 in expenditures between two CFDAs. As a result
of the misclassification, expenditures were overstated for CFDA 84.424
and understated for CFDA 84.425 by that amount.  The misclassification
occurred because the University of Houston did not have an adequate
review process to verify that federal awards were properly categorized.
Recommendation
The University of Houston should strengthen its SEFA preparation and review
process to help ensure that it prepares its SEFA correctly, including reporting
expenditures in the appropriate fiscal year and CFDA.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 15
Views of Responsible Officials
The University acknowledges and agrees with the finding and will develop a
corrective action plan.
Corrective Action Plan
The University will update their SEFA preparation and review procedures to
include PW’s in Note 8 based on Award Date and will improve its CFDA
assignment and review procedures for new CFDA processes by ensuring that
the CFDA is confirmed.
Implementation Date:
February 28, 2021
Responsible Person:
AVP Finance and Controller

The University of Texas at Arlington
The University of Texas at Arlington (UTA) understated expenditures on its
fiscal year 2020 SEFA by $247,954 for 1 Student Financial Assistance (SFA)
CFDA program. That occurred because UTA incorrectly classified some SFA
disbursements as “prepaid expenses” and excluded them from the fiscal year
2020 SEFA. However, SFA disbursements should be reported on the SEFA for
the fiscal year in which they are made; therefore, those disbursements
should have been included on UTA’s fiscal year 2020 SEFA.
Recommendation
The University of Texas at Arlington should strengthen its SEFA preparation
and review process to help ensure that it prepares its SEFA correctly,
including reporting expenditures in the appropriate fiscal year.
Views of Responsible Officials
The University of Texas at Arlington (UTA) acknowledges and agrees with the
finding. As recommended, through analysis of the exception identified in the
audit, UTA has implemented corrective action to further improve the
processes.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 16
Corrective Action Plan
UTA immediately implemented process enhancements on December 15, 2020
upon discovery of the error. Financial Aid will verify that item types are
established for Fall Term to record disbursements to students correctly to the
general ledger. Student Financial Accounting will verify during the year-end
reconciliation process that item types are set up correctly according to a list
of non-exchange programs and will record corrections for any that were set
up incorrectly. Annually, Financial Reporting will review and update the list
for any new non-exchange awards received.
Implementation Date:
December 15, 2020
Responsible Persons:
Executive Director of Financial Aid
Director of Financial Reporting

Texas Southern University
On its fiscal year 2020 SEFA, Texas Southern University (TSU):

Overstated expenditures on Note 8 by $797,870. The overstatement
occurred because TSU incorrectly included expenditures associated with
project worksheets that FEMA approved subsequent to fiscal year 2020.

Reported $128,347 of unsupported expenditures on Note 8.  TSU could
not provide support for the expenditures, including documentation
showing when the expenditures were incurred.  As a result, auditors
could not determine whether the unsupported expenditures were
correctly included on Note 8.
Recommendation
Texas Southern University should strengthen its SEFA preparation and review
process to help ensure that it prepares its SEFA notes correctly, including
reporting expenditures in the appropriate fiscal year and maintaining
adequate support for all expenditures reported.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 17
Views of Responsible Officials
Research Financial Services, Financial Reporting, Facilities & Maintenance
Services and Risk Management and Insurance Services agrees with the
recommendation to correctly prepare Note 8 to the Schedule of Expenditures
for Federal Awards, and to maintain appropriate supporting documentation
for its expenditures.
Corrective Action Plan
Texas Southern University agrees with the recommendation to strengthen its
SEFA preparation and review process to ensure that it prepares its SEFA notes
correctly, inclusive of reporting expenditures in the appropriate fiscal year
and maintaining adequate support for all expenditures reported. Standard
operating procedures are being designed to properly record Public Assistance
(FEMA) Grant reimbursements to the general ledger in the correct accounting
period and align appropriately with the SEFA reporting for state and grant
funding specific to eligible costs associated with the repair, replacement or
restoration of disaster damaged facilities to mitigate the risk of
under/overstatements. Additionally, the controlled processes will entail
maintaining the correct supporting documentation for each project; and
involves the engagement of Financial Reporting, Facilities and Maintenance
Services, Risk Management and Insurance Services and Research Financial
Services.
Implementation Date:
May 2021
Responsible Persons:
Executive Director, Financial Accounting
Executive Director, Facilities and Maintenance
Services
Risk Manager, Risk Management and Insurance
Services
Director, Research Financial Services

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 18
Chapter 3
Federal Award Findings and Questioned Costs
A finding regarding the Schedule of Expenditures of Federal Awards for fiscal
year 2020 was included in Chapter 2-A of this report. All other fiscal year
2020 federal award information was issued in a separate report. See State of
Texas Federal Portion of the Statewide Single Audit Report for the Year Ended
August 31, 2020, by CLA.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 19

Summary Schedule of
Prior Audit Findings
State of Texas Financial Portion of the
Statewide Single Audit Report for the
Year Ended August 31, 2020

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 20
Chapter 4
Summary Schedule of Prior Audit Findings
Federal regulations (Title 2, U.S. Code of Federal Regulations, Part 200,
Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards) state that “the auditee is responsible for
follow-up and corrective action on all audit findings.” As part of this
responsibility, the auditees report the corrective actions they have taken for
the findings reported in:
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2008 (State Auditor’s Office Report No. 09-555,
April 2009).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2009 (State Auditor’s Office Report No. 10-555,
March 2010).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2010 (State Auditor’s Office Report No. 11-555,
February 2011).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2011 (State Auditor’s Office Report No. 12-555,
February 2012).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2012 (State Auditor’s Office Report No. 13-555,
February 2013).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2013 (State Auditor’s Office Report No. 14-555,
February 2014).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2014 (State Auditor’s Office Report No. 15-555,
February 2015).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2015 (State Auditor’s Office Report No. 16-555,
March 2016).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2016 (State Auditor’s Office Report No. 17-555,
February 2017).

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 21
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2017 (State Auditor’s Office Report No. 18-555,
February 2018).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2018 (State Auditor’s Office Report No. 19-555,
February 2019).
State of Texas Financial Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2019 (State Auditor’s Office Report No. 20-555,
February 2020).
The Summary Schedule of Prior Audit Findings (for the year ended August 31,
2020) has been prepared to address these responsibilities.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 22
Chapter 4-A
The Texas Workforce Commission Should Strengthen Certain
Controls Over Financial Reporting
Issue 1
The Texas Workforce Commission Should Strengthen Its Financial Reporting
Processes
Reference No. 20-555-01

Type of finding: Material Weakness
The Texas Workforce Commission (Commission) had processes to help
ensure that the financial information it reported to the State’s
accounting system reconciled to the Commission’s internal
accounting system.  However, while it reported accurate financial
information in its published fiscal year 2019 annual financial report,
it did not accurately report fiscal year 2019 financial information
related to net position to the State’s accounting system. As a result,
there was a material weakness in the Commission’s internal control
processes for financial reporting (see text box for additional
information on material weaknesses).
The Office of the Comptroller of Public Accounts (Comptroller’s
Office) uses the State’s accounting system to produce the State’s
Comprehensive Annual Financial Report. Therefore, the submission
of incorrect financial data to the State’s accounting system could
lead the State to produce misstated financial statements.
Specifically, the Commission incorrectly reported to the State’s
accounting system net position balances for one of the funds that
comprise the Commission’s Unemployment Trust Fund (see text
box for more information on funds). That one fund did not have
any activity in fiscal year 2019; therefore, the Commission should
not have reported an unrestricted net position balance of $100.3
million and a restricted net position for debt retirement balance of
negative $100.3 million for that fund. This error occurred because
the journal entry that the Commission made did not appropriately correct
the net position balances in the State’s accounting system.
The Comptroller’s Office’s Reporting Requirements for the Annual Financial
Reports of State Agencies and Universities requires each agency to ensure
and certify that its financial data correctly reflected its financial position as of
August 31, 2019, as recorded in the State’s accounting system and the
agency’s internal accounting system.
To ensure that the issue discussed above did not affect the accuracy of the
State’s Comprehensive Annual Financial Report, the Comptroller’s Office
Fund Definition
A fund is a fiscal and accounting entity
with a self-balancing set of accounts,
which are segregated for the purpose of
carrying on specific activities or
attaining certain objectives in
accordance with special regulations,
restrictions, or limitations.
Source: Governmental Accounting
Standards Board, Statement No. 34,
Basic Financial Statements—and
Management's Discussion and Analysis—
for State and Local Governments,
paragraph 208.
Material Weakness in Internal
Control
A material weakness is a deficiency, or
combination of deficiencies, in internal
control, such that there is a reasonable
possibility that a material misstatement
of an entity’s financial statements will
not be prevented, or detected and
corrected, on a timely basis.
Source:  American Institute of Certified
Public Accountants AU-C Section
265.07, Communicating Internal
Control Related Matters Identified in
an Audit.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 23
made appropriate adjustments to the Commission’s net position balances
during its preparation of the State’s Comprehensive Annual Financial Report.
Implementation Status
Corrective action was implemented.

Chapter 4-B
State Entities Should Strengthen the Preparation and Review of
Their Schedules of Expenditures of Federal Awards
Reference No. 20-555-02
(Prior Audit Issues 19-555-01, 18-555-04, 17-555-04, 16-555-04, 15-555-05, 14-555-07, 13-555-02, 12-
555-05, 11-555-17, 10-555-26, and 09-555-19)

Type of finding: Significant Deficiency
The agencies and higher education institutions
discussed below did not appropriately prepare or
adequately review their fiscal year 2019 Schedule of
Expenditures of Federal Awards (SEFA) (see text box
for additional information). Therefore, the SEFAs that
they submitted to the Office of the Comptroller of
Public Accounts (Comptroller’s Office) contained
errors.
Those agencies reported $32,746,187,774 in federal
expenditures, or 58 percent of the total federal
expenditures that the State of Texas reported for fiscal
year 2019. The errors listed below were not material
to the fiscal year 2019 SEFA for the State of Texas or to
the fiscal year 2019 Comprehensive Annual Financial
Report for the State of Texas. However, collectively,
they represent control weaknesses that could be
significant to the State’s SEFA.

Department of Agriculture
The Department of Agriculture (Department) incorrectly classified
$58,911,752 of expenditures between 2 Catalog of Federal Domestic
Assistance (CFDA) programs on its fiscal year 2019 SEFA. This occurred
because the Department incorrectly reported all program expenditures
under the administrative CFDA. The Department should have reported the
expenditures under the corresponding direct program CFDA.
Schedule of Expenditures of Federal Awards
(SEFA)
Each state entity that expends federal awards is
required to prepare a Schedule of Expenditures of
Federal Awards (SEFA) and submit it to the Office of
the Comptroller of Public Accounts (Comptroller’s
Office). The expenditures are to be presented in the
SEFA on the same accounting basis as each state
entity’s fund financial statements.
Federal awards include federal financial assistance
and federal cost-reimbursement contracts that non-
federal entities receive directly from federal
awarding agencies or indirectly from pass-through
entities [Title 2, U.S. Code of Federal Regulations
(CFR), Section 200.38].
Federal financial assistance includes any assistance
that non-federal entities receive or administer in the
form of grants, loans, loan guarantees, non-cash
contributions or donations of property (including
donated surplus property), cooperative agreements,
interest subsidies, insurance, food commodities,
direct appropriations, and other assistance [Title 2,
CFR, Section 200.40].
Source: Reporting Requirements for Annual Financial
Reports of State Agencies and Universities,
Comptroller’s Office.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 24
Implementation Status
Corrective action was implemented.

Department of Housing and Community Affairs
The Department of Housing and Community Affairs (Department) incorrectly
classified $554,256 for 2 CFDA programs on its fiscal year 2019 SEFA. This
occurred because the Department did not accurately allocate expenditures
between direct and pass through expenditure categories.
Implementation Status
Corrective action was implemented.

Health and Human Services Commission
The Health and Human Services Commission (Commission) did not report
cash rebates received during fiscal year 2019 related to the Special
Supplemental Nutrition Program for Women, Infants, and Children (WIC) in
the Notes to the SEFA. As a result, the Commission’s fiscal year 2019 SEFA
Note 6 was understated by $211,626,201. This occurred because the
Commission had inadequate procedures and review processes to ensure
complete and accurate reporting of all required SEFA notes.
Implementation Status
Corrective action was implemented.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 25
During fiscal year 2019, four higher education institutions had uncorrected
recommendations from issues identified during the audit of its fiscal year
2018 Schedule of Expenditures of Federal Awards (SEFA). Auditors conducted
limited procedures to follow up on the status of the findings related to the
preparation of its SEFAs in fiscal years 2018 and 2019.  Two higher education
institutions partially implemented the recommendations from the prior
audit. Two higher education institutions fully implemented the
recommendations from the prior audit.
Reference No. 19-555-01

Type of finding: Significant Deficiency
The higher education institutions discussed below did not appropriately
prepare or adequately review their fiscal year 2018 SEFAs.

The University of Texas at Austin
On its fiscal year 2018 SEFA, the University of Texas at Austin (UT Austin):

Incorrectly classified $2,280,241 in expenditures related to 2 generic
CFDA programs.

Incorrectly classified $12,976 in expenditures related to 3 CFDAs as part
of the Research and Development cluster of federal programs. Those
expenditures should not have been classified as part of the Research and
Development cluster of federal programs.
Implementation Status
This finding was reissued as current year reference number 21-555-01.

The University of Texas M.D. Anderson Cancer Center
On its fiscal year 2018 SEFA, the University of Texas M.D. Anderson Cancer
Center (M.D. Anderson):

Incorrectly excluded $26,696,473 in expenditures because it did not
include expenditures paid from program income for 6 CFDAs. As a result,
M.D. Anderson (1) understated expenditures on its SEFA by $26,696,473
and (2) understated federal revenue by $26,696,473 in Note 2 to its SEFA.

Incorrectly classified $3,877,918 in expenditures related to 1 CFDA as part
of the Research and Development cluster of federal programs. Those

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 26
expenditures should not have been classified as part of the Research and
Development cluster of federal programs.

Incorrectly classified $83,808 in expenditures for 2 CFDA programs on its
SEFA.

Incorrectly based its SEFA on revenues rather than expenditures for the
Disaster Grants – Public Assistance (Presidentially Declared Disasters)
program. As a result, M.D. Anderson could not determine whether Note
8, a required disclosure related to that program, applied to expenditures
for that program.
Implementation Status
Corrective action was implemented.

The University of Texas Medical Branch at Galveston
On its fiscal year 2018 SEFA, the University of Texas Medical Branch at
Galveston (UTMB):

Overstated federal revenue by $415,789 and incorrectly included a
reconciling item related to that revenue in Note 2 to its SEFA. That
occurred because UTMB incorrectly included revenue received on non-
fixed fee contracts in its calculation of the reconciling item for federal
revenue received on the fixed fee basis contract in Note 2 to its SEFA.

Incorrectly classified $878,548 in expenditures related to 6 CFDAs as part
of the Research and Development cluster of federal programs. Those
expenditures should not have been classified as part of the Research and
Development cluster of federal programs.
Implementation Status
Corrective action was implemented.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 27
The University of Texas Southwestern Medical Center
On its fiscal year 2018 SEFA, the University of Texas Southwestern Medical
Center (UT Southwestern):

Overstated expenditures by $1,247,151 for 1 Student Financial Assistance
CFDA program. UT Southwestern did not make any disbursements for
this program in fiscal year 2018. Instead, that amount represented the
entire balance of the program. As a result, UT Southwestern
(1) overstated the outstanding balance of loans by $1,236,735 in Note 3a
to its SEFA, (2) understated the beginning balance of outstanding loans by
$10,416 in Note 3a to its SEFA, and (3) overstated new loans processed
amount by $1,247,151 in Note 2 and Note 3a to its SEFA.

Incorrectly classified $360,220 in expenditures using a generic CFDA
(43.000) instead of the CFDA identified in the award agreement (43.003).

Overstated federal revenue by $112,085 in Note 2 to its SEFA and
incorrectly included a reconciling item (specifically, federal revenue
received under a vendor relationship between the agency and the federal
government) related to that revenue in Note 2 to its SEFA. That occurred
because UT Southwestern incorrectly reported federal revenue received
from vendor relationships with non-federal government entities.

Incorrectly included $212,064 in expenditures related to 2 CFDAs on its
SEFA; it should have included those expenditures as a reconciling item
(specifically, federal revenue received under a vendor relationship
between the agency and the federal government) in Note 2 of its SEFA.
As a result, UT Southwestern overstated expenditures on its SEFA by
$212,064.

Overstated $176,270 in expenditures related to 2 CFDAs. That occurred
because UT Southwestern included non-federal expenditures on its SEFA.
As a result, UT Southwestern overstated federal revenue by $176,270 in
Note 2 to its SEFA.
Recommendation
UT Southwestern should strengthen its SEFA preparation and review process
to help ensure that it prepares its SEFA correctly, including ensuring that it:

Prepares its SEFA beginning and outstanding balances and new loans
processed correctly in the notes to its SEFA.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 28

Reports appropriate expenditures for each federal award and cluster of
federal programs.

Reports correct CFDAs for each federal award.

Reports federal revenues and reconciling items correctly and only when
appropriate in the notes to its SEFA.
Implementation Status
Partially implemented.
Views of Responsible Officials 2018

Overstated expenditures by $1,247,151 for 1 Student Financial Assistance
CFDA program. UT Southwestern did not make disbursements for this
program in fiscal year 2018. Instead, that amount represented the entire
balance of the program. As a result, UT Southwestern (1) overstated the
outstanding balance of loans by $1,236,735 in Note 3a to its SEFA (2)
understated the beginning balance of outstanding loans by $10,416 in
Note 3a to its SEFA, and (3) overstated new loans processed amount by
$1,247,151 in Note 2 and Note 3a to its SEFA.
UT Southwestern acknowledges and agrees that a data entry error occurred
that resulted in an overstatement of expenditures. We have added an
additional step to our review process to reduce the risk of future errors – see
detail below.
Corrective Action Plan 2018
We have updated our report review procedures to include the Financial Aid
Office as a reviewer. This will allow the business owner to provide an
additional review of the report to ensure accuracy.
Implementation Date:     February 8, 2019
Responsible Person:      Director of Fiscal Reports and Accounting Operations
Views of Responsible Officials 2018

Incorrectly classified $360,220 in expenditures using a generic CFDA
(43.000) instead of the CFDA identified in the award agreement (43.003).

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 29
UT Southwestern acknowledges and agrees that a data entry error of CFDA
43.000 rather than 43.003 resulted in classifying the respective expenditures
to the National Aeronautics and Space Administration (NASA) generic CFDA,
rather than to NASA’s specific program, Exploration.
Corrective Action Plan 2018
We recently realigned SPA personnel to create a dedicated award set-up
team, and have reiterated the importance for each person to review their
entries carefully and assure all CFDA entries are accurate and directly
represent the CFDA provided within the NOA—original or as amended.
Further, we are reviewing options as to how we can enhance system controls
and quality reviews within the entry process.
Implementation Date:      February 8, 2019 – June 01, 2019
Responsible Person:       Director of Post Award Accounting
Views of Responsible Officials 2018

Overstated federal revenue by $112,085 in Note 2 to its SEFA and
incorrectly included a reconciling item (specifically, federal revenue
received under a vendor relationship between the agency and the federal
government) related to that revenue in Note 2 to its SEFA. That occurred
because UT Southwestern incorrectly reported federal revenue received
from vendor relationships with non-federal government entities.
UT Southwestern acknowledges and agrees that revenue recognized under an
agreement(s) with the Dallas VA Research Corporation was incorrectly
reported on UT Southwestern’s SEFA.
Corrective Action Plan 2018
We recently realigned SPA personnel to create a dedicated award set-up
team, and have reiterated the importance for each individual to assure any
assignment of a CFDA requires sufficient and appropriate support narrated
within the award—original and/or as amended. Further, we are reviewing
options as to how we can enhance system controls and quality reviews within
the entry process.
Implementation Date:      February 8, 2019 – June 01, 2019
Responsible Person:       Director of Post Award Accounting

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 30
Views of Responsible Officials 2018

Incorrectly included $212,064 in expenditures related to 2 CFDAs on its
SEFA; it should have included those expenditures as a reconciling item
(specifically, federal revenue received under a vendor relationship
between the agency and the federal government) in Note 2 of its SEFA. As
a result, UTSW overstated expenditures on its SEFA by $212,064
UT Southwestern acknowledges that expenditures incurred under an
agreement with the VA North Texas Health Care System to support residents
and fellows in training was incorrectly reported on its SEFA.
Corrective Action Plan 2018
We recently realigned SPA personnel to create a dedicated award set-up
team, and have reiterated the importance for each individual to assure any
assignment of a CFDA requires sufficient and appropriate support narrated
within the award—original and/or as amended. Further, we are reviewing
options as to how we can enhance system controls and quality reviews within
the entry process.
Implementation Date:      February 8, 2019 – June 01, 2019
Responsible Person:       Director of Post Award Accounting
Views of Responsible Officials 2018

Overstated $176,270 in expenditures related to 2 CFDAs. That occurred
because UT Southwestern included non-federal expenditures on its SEFA.
As a result, UT Southwestern overstated federal revenue by $176,270 in
Note 2 to its SEFA.
UT Southwestern acknowledges that the above referenced expenditures were
reported on its SEFA, with likely insufficient support. In particular and for the
respective expenditures, the correlating agreement included a multitude of
federal requirements, typically required and present within a federal flow
through agreement. However, UT Southwestern acknowledges that there was
also no specific reference to a CFDA therein.
Corrective Action Plan 2018
We recently realigned SPA personnel to create a dedicated award set-up
team, and have reiterated the importance for each individual to assure any
assignment of a CFDA requires sufficient and appropriate support narrated

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 31
within the award—original and/or as amended. Further, we are reviewing
options as to how we can enhance system controls and quality reviews within
the entry process.
Implementation Date:      February 8, 2019 – June 01, 2019
Responsible Person:       Director of Post Award Accounting
Views of Responsible Officials 2019
The University acknowledges and agrees with the finding that its corrective
action plan is partially implemented. Through analysis of the exceptions
identified in the audit, the University will work to develop and implement
corrective action to further improve compliance.
Corrective Action Plan 2019
The University will implement additional processes to more effectively
monitor the necessary attributes to properly report expenditures incurred
against the University’s federal awards. Combined with this monitoring, we
will update our reporting template via auto-population of specific attributes,
rather than the manual input, which had been deployed previously. These
enhanced processes and quality control measures will assure proper expense
categorization, by sponsor, within the various aspects of the SEFA, as well as
Note 2.
Implementation Date:      May 31, 2020
Responsible Person:        Assistant Vice President of Sponsored Programs
Views of Responsible Officials 2020
UT Southwestern acknowledges and agrees with the finding that its
corrective action plan is partially implemented. Through analysis of the
exceptions identified in the audit, UT Southwestern will implement corrective
action to further improve compliance.
Corrective Action Plan 2020
UT Southwestern has further enhanced its financial reporting capabilities
through additional query builds, dual balance check controls, and sensitivity
analysis. In addition to these enhancements, we will conduct an assessment
of all business process improvements, reporting enhancements, and controls
used to report SEFA expenditures. These additional measures will yield proper

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 32
expense categorization, by sponsor, within all aspects of the SEFA and assure
end-to-end process validation.
Implementation Date:      May 31, 2021
Responsible Person:          Assistant Vice President Sponsored Programs
Administration

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 33
Appendices
Appendix 1
Objective, Scope, and Methodology
Objective
The audit objective was to determine whether the State’s basic financial
statements present fairly, in all material respects, the consolidated balances
and activities for the State of Texas for the fiscal year ended August 31, 2020.
The Statewide Single Audit is an annual audit for the State of Texas. It is
conducted so that the State complies with (1) the Single Audit Act
Amendments of 1996 and Title 2, U.S. Code of Federal Regulations, Part 200,
Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Guidance) and (2) state statute
requiring that an audited Comprehensive Annual Financial Report be
provided to the Governor (Texas Government Code, Section 403.013(c)).
Scope
The scope of the financial portion of the Statewide Single Audit included an
audit of the State’s basic financial statements and a review of significant
controls over financial reporting and compliance with applicable
requirements. The opinion on the basic financial statements, published in the
Comprehensive Annual Financial Report for the fiscal year ended August 31,
2020, was dated February 23, 2021.
The scope of the federal compliance portion of the Statewide Single Audit
included an audit of the State’s Schedule of Expenditures of Federal Awards
(SEFA), a review of compliance for each major program, and a review of
significant controls over federal compliance. The State Auditor’s Office
contracted with CliftonLarsonAllen LLP (CLA) to provide an opinion on
compliance for each major program and internal control over compliance.
The State Auditor’s Office provided an opinion on the State’s SEFA, in
relation to its opinion on the CAFR. Information on the federal compliance
portion of the Statewide Single Audit is included in a separate report entitled
State of Texas Federal Portion of the Statewide Single Audit Report for the
Year Ended August 31, 2020, by CLA.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 34
Methodology
The audit methodology included collecting information, verifying certain
information collected, conducting data analyses, performing selected audit
tests, and other procedures, and analyzing and evaluating the results against
established criteria.
To avoid duplication of effort, the State Auditor’s Office relied on CLA’s
testing of the internal controls over certain systems and processes as they
related to the financial portion of the Statewide Single Audit.
Auditors assessed the reliability of the State’s data by (1) performing
electronic tests of required data elements, (2) reviewing existing information
about data and the systems that produced the data, and (3) interviewing
agency and higher education institution officials knowledgeable about data.
Auditors determined that the data was sufficiently reliable for the purposes
of the audit.
Sampling Methodology
As part of the audit procedures performed on the SEFA, auditors selected a
risk-based sample of generic Catalog of Federal Domestic Assistance
numbers (CFDAs) to test that the correct unique identifying number was
reported.
Information collected and reviewed included the following:

Agency and higher education institution policies and procedures.

Agency and higher education institution systems documentation.

Agency and higher education institution accounting data, which consisted
of accounting data from agency and higher education institution internal
accounting systems and accounting data from the Uniform Statewide
Accounting System.

Agency and higher education institution year-end accounting
adjustments.

Agency and higher education institution fiscal year 2020 annual financial
reports.

Agency and higher education institution fiscal year 2020 SEFA
submissions to the Office of the Comptroller of Public Accounts
(Comptroller’s Office).

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 35
Information systems reviewed included the following:

Agency internal accounting systems.

Uniform Statewide Accounting System.
Procedures and tests conducted included the following:

Evaluating automated systems controls.

Performing analytical tests of account balances.

Evaluating agency and higher education institution transactions.

Comparing agency and higher education institution accounting practices
with the Comptroller Office’s reporting requirements.
Criteria used included the following:

Texas statutes.

The Texas Administrative Code.

The General Appropriations Act (86th Legislature).

The Comptroller’s Office policies and procedures.

The Comptroller’s Office’s Reporting Requirements for the Annual
Financial Reports of State Agencies and Universities.

Agency and higher education institution policies and procedures.

Title 2, U.S. Code of Federal Regulations, Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards.

Generally accepted accounting principles as established by existing
authoritative literature including, but not limited to, literature published
by the Govermental Accounting Standards Board and the Financial
Accounting Standards Board.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 36
Project Information
Audit fieldwork was conducted from August 2020 through February 2021.
We conducted this audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that the
State Auditor’s Office and those performing the audit be independent, and
that we plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on our
audit objectives. The State Auditor’s Office implemented safeguards to
maintain its independence to perform this audit. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
The following members of the State Auditor’s staff performed the audit of
the Comprehensive Annual Financial Report:

Jeannette Quiñonez Garcia, CPA (Project Manager)

Anca Pinchas, CPA, CISA, CIDA (Assistant Project Manager)

Philip Stringer, CPA (Assistant Project Manager)

Nimita Azam, M.Sc. Finance

Robert (Rob) H. Bollinger, CPA, CGMA, CFE

Mohammad Ali Bawany, CISA

Morgan Burandt, CPA

Robert Burg, MPA, CPA, CFE

Chase Dierschke, Macy, CIA

Kristin Auriel Rene’ Franklin, MSA

Lauren Futch, CPA

Elizabeth Gallegos, MAcc

Jennifer Grant, CFE

Taylor L. Huff, CFE

Joyce Inman, CGFM

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 37

Eric Ladejo, MPA, CFE, CIA

Alana Montoro

Robert Pagenkopf, MBA, CFE

Fabienne Robin, MBA

Nakeesa Shahparasti, CPA, CFE, CISA

Michelle Ann Duncan Feller, CPA, CIA (Quality Control Reviewer)

Michael Owen Clayton, CPA, CISA, CFE, CIDA (Audit Manager)
The following members of the State Auditor’s staff performed the audit of
the Schedule of Expenditures of Federal Awards:

Adam K. Ryan (Project Manager)

Adam Berry, CFE (Assistant Project Manager)

Brandy Corbin

Rebecca Franklin, CFE, CISA, CGAP

Allison Fries, CFE

Rachel Goldman, CPA

Lauren Ramsey

Daniel Thu

Ann E. Karnes, CPA (Quality Control Reviewer)

Becky Beachy, CIA, CGAP (Audit Manager)

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 38
Appendix 2
Agencies and Higher Education Institutions Audited
Financial accounts were audited at the following agencies:

Health and Human Services Commission.

Office of the Comptroller of Public Accounts.

Office of the Governor.

Texas Education Agency.

Texas Workforce Commission.
Schedule of Expenditures of Federal Awards at the following agencies and
higher education institutions were audited by either the State Auditor’s
Office or CLA:

Department of Agriculture.

Department of Family and Protective Services.

Department of Housing and Community Affairs (auditors performed only
prior-year finding follow-up work).

Department of State Health Services.

General Land Office.

Health and Human Services Commission.

Office of the Attorney General.

Sam Houston State University.

Texas A&M University.

Texas Division of Emergency Management.

Texas Education Agency.

Texas Southern University.

Texas State University.

Texas Tech University.

Texas Workforce Commission.

State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2020
SAO Report No. 21-555
February 2021
Page 39

The University of Texas at Arlington.

The University of Texas at Austin.

The University of Texas at El Paso.

The University of Texas Rio Grande Valley.

The University of Texas at San Antonio.

The University of Texas M.D. Anderson Cancer Center (auditors
performed only prior-year finding follow-up work).

The University of Texas Medical Branch at Galveston (auditors performed
only prior-year finding follow-up work).

The University of Texas Southwestern Medical Center (auditors
performed only prior-year finding follow-up work).

University of Houston.

University of North Texas.

Copies of this report have been distributed to the following:
Legislative Audit Committee
The Honorable Dan Patrick, Lieutenant Governor, Joint Chair
The Honorable Dade Phelan, Speaker of the House, Joint Chair
The Honorable Jane Nelson, Senate Finance Committee
The Honorable Robert Nichols, Member, Texas Senate
The Honorable Greg Bonnen, House Appropriations Committee
The Honorable Morgan Meyer, House Ways and Means Committee
Office of the Governor
The Honorable Greg Abbott, Governor
Boards, Commissions, Chancellors, Executive
Directors, and Presidents of the Following Agencies
and Higher Education Institutions
Department of Agriculture
Department of Family and Protective Services
Department of Housing and Community Affairs
Department of State Health Services
General Land Office
Health and Human Services Commission
Office of the Attorney General
Office of the Comptroller of Public Accounts
Sam Houston State University
Texas A&M University
Texas Division of Emergency Management
Texas Education Agency
Texas Southern University
Texas State University
Texas Tech University
Texas Workforce Commission
The University of Texas at Arlington
The University of Texas at Austin
The University of Texas at El Paso
The University of Texas Rio Grande Valley
The University of Texas at San Antonio
The University of Texas M.D. Anderson Cancer Center
The University of Texas Medical Branch at Galveston
The University of Texas Southwestern Medical Center
University of Houston
University of North Texas

This document is not copyrighted.  Readers may make additional copies of this report as
needed.  In addition, most State Auditor’s Office reports may be downloaded from our Web
site: www.sao.texas.gov.

In compliance with the Americans with Disabilities Act, this document may also be requested
in alternative formats.  To do so, contact our report request line at (512) 936-9500 (Voice),
(512) 936-9400 (FAX), 1-800-RELAY-TX (TDD), or visit the Robert E. Johnson Building, 1501
North Congress Avenue, Suite 4.224, Austin, Texas 78701.

The State Auditor’s Office is an equal opportunity employer and does not discriminate on the
basis of race, color, religion, sex, national origin, age, or disability in employment or in the
provision of services, programs, or activities.

To report waste, fraud, or abuse in state government visit https://sao.fraud.texas.gov.

File and source

File

REPORT_TX-State-Auditor_Statewide-Single-Audit-FY2020-CRF_21-555_2021-02.pdf

Size

2,003,052 bytes

SHA-256

433ca60189f969e0dd8cc423b99e4a8b56aafe95622d4205d9de264a91a44d17

Our copy

REPORT_TX-State-Auditor_Statewide-Single-Audit-FY2020-CRF_21-555_2021-02.pdf

Original

sao.texas.gov