State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2012 Page: 3 of 48
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State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2012
SAO Report No. 13-555
Auditing 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. Through that effort, auditors
identified specific weaknesses in information technology access controls that the
Texas Education Agency should correct to improve the reliability of its financial
information. Those weaknesses are discussed in Chapter 2-A of this report.
The State Auditor's Office also audited the State's Schedule of Expenditures of
Federal Awards (SEFA) in relation to the Comprehensive Annual Financial Report
for fiscal year 2012. The Office of the Comptroller of Public Accounts prepares the
SEFA by using SEFA data from all state agencies and higher education institutions
that made federal expenditures during the fiscal year. The State Auditor's Office
and KPMG LLP (KPMG) audited the processes for preparing SEFA information at 17
agencies and 13 higher education institutions. That audit work included following
up on SEFA findings identified in audits of prior fiscal years at 3 agencies and 9
higher education institutions. Auditors identified errors related to the SEFA
information at 3 agencies and 7 higher education institutions. Those errors are
discussed in Chapter 2-B of this report.
To avoid duplication of effort, the State Auditor's Office relies on KPMG's testing
of the internal controls over certain systems and processes. While testing the
State's compliance with federal requirements, KPMG identified a material
weakness in the managed care program at the Health and Human Services
Commission that was caused by inadequate segregation of duties and the use of a
manual calculation process for payments to managed care organizations. The
managed care program is material to the State's financial statements, and total
payments to managed care providers for fiscal year 2012 totaled approximately $9
billion. The material weakness KPMG identified is related to both financial
processes and federal compliance. As of April 2012, the managed care program
includes approximately 85 percent of the individuals covered by Medicaid in Texas.
For more information see finding 13-14 in State of Texas Federal Portion of the
Statewide Single Audit Report for the Fiscal Year Ended August 31, 2012, by
KPMG.
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
are used primarily by companies that review the State's fiscal integrity to rate
state-issued bonds, the Legislature, and by federal agencies that award grants.ii
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Texas. Office of the State Auditor. State of Texas Financial Portion of the Statewide Single Audit Report for the Year Ended August 31, 2012, report, February 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth518039/m1/3/: accessed June 20, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.