An Audit of the Financial Statements of The Teacher Retirement System of Texas Year Ended August 31, 1995 Page: 2 of 26

                                
Key Points Of Report
An Audit of the Financial Statements of the
Teacher Retirement System of Texas
Year Ended August 31, 1995
April 1996
Overall Conclusion
Based on our audit, the Teacher Retirement System's (System) general purpose financial
statements for fiscal year 1995 are accurately presented in all material respects, in
accordance with generally accepted accounting principles. We noted no material internal
control weaknesses or noncompliance with laws and regulations. However, other matters
involving weaknesses in the internal control structure and its operation are summarized
below.
Key Facts And Findings
"  The System has implemented or made progress toward implementing most previous
audit recommendations. However, three previous recommendations, discussed below,
are repeated.
"  As commented on in the System's prior year management letter, anticipated dividend
income controls are generally effective; however, we again noted cases where
controls did not function or were not applied as intended, particularly with international
dividend income. In fiscal year 1995, dividend income covered by such controls
totaled $561 million, of which international equaled $65 million.
"  Although the System maintains considerable computer resources, the Security
Administrator does not report directly to the Director of the Management Information
Systems Department. Organizational placement of the Security Administrator can be
critical to accomplishing its responsibilities and operating as an effective control. To
accomplish its responsibilities and be an effective control, the Security Administrator
should report to a position with sufficient independence and authority to take
necessary corrective actions.
"   Improvement of control procedures over the System's $10 million in furniture and
equipment and enhancement of controls to prevent accounting entries to closed
periods are repeated from similar prior year comments.
Contact
Barbara Hankins, Audit Manager (512) 479-4700
Eo       Office of the State Auditor
F- Lawrence F. Alwin, CPA
cs            This audit of the financial statements was conducted in accordance with generally accepted
1            auditing standards and Government Auditing Standards, issued by the Comptroller General of
the United States.