An Audit Report on Compliance with Benefits Proportional by Fund Requirements at Selected State Entities
March 2014
Report Number 14-027
Overall Conclusion
For appropriation year 2012 , all four agencies audited submitted a Benefits Proportional by Fund Report to the Office of the Comptroller of Public Accounts (Comptroller) by the required due date. However, auditors identified errors in the reports for all four agencies and inconsistencies among the agencies in how each agency prepared its report. The errors identified included the failure to include group retiree insurance payments, the incorrect inclusion or exclusion of certain types of revenue or expenditures, and the misclassification of federal and state funds. Three of the four agencies audited also did not separately include required documentation on retiree group insurance expenses (see Chapter 1-A).
In addition, three of the four agencies audited did not have current policies and procedures for the preparation of their Benefits Proportional by Fund Reports and two agencies made proportionality calculations incorrectly, which resulted in auditors identifying additional needed adjustments or refunds.
The requirements to pay benefits proportionally to funding sources were set forth on page IX-28, Section 6.08, of the General Appropriations Act (82nd Legislature) and in the Comptroller's Accounting Policy Statement (APS) 011.
To comply with APS 011 requirements, 160 agencies and higher education institutions were required to submit a Benefits Proportional by Fund Report or a single source letter for appropriation years 2012 and 2013 to the Comptroller and the State Auditor's Office. State entities can file a single source letter instead of a Benefits Proportional by Fund Report if they are funded from a single fund and that fund does not include federal funds. According to unaudited data provided by the Office of the Comptroller:
- Of the 160 state entities required to submit a report or letter for appropriation year 2012, 5 entities (3 percent) did not submit a required report or letter.
- Of the 160 state entities required to submit a report or letter for appropriation year 2013, 4 (3 percent) did not submit a report or letter.
Throughout the fiscal year, state entities pay employee benefit expenses such as Social Security contributions, group insurance, and retirement using the funds from which employees' salaries are paid. To comply with the General Appropriations Act, Article IX, Section 6.08, state entities must submit a Benefits Proportional by Fund Report to the Comptroller each November that determines whether benefit expenses should be reallocated among different funds, such as General Revenue, Dedicated General Revenue, federal funds, or other funds (including higher education institution local funds).
To determine what adjustments need to be made to achieve proportionality, agencies and higher education institutions complete a worksheet that lists (1) the percentage of total funding that each funding source represents, (2) how much each funding source has paid in benefit expenditures throughout the year, and (3) how much each funding source should pay in benefit expenditures to cover its necessary percentage of total benefits-related expenditures.
Auditors communicated other, less significant issues to the entities separately in writing.