Top 10 Audit Findings in Post-Payment Audits (2026)

1. Missing/Incomplete Vendor Compliance Verifications

The Issue

State agencies are not completing (or documenting) vendor compliance verifications before awarding a contract. If a vendor is listed on one of these lists, then the state may not do business with that vendor. These verifications include the System for Award Management, the debarred vendor list, the Iran, Sudan and foreign terrorist organizations lists, the boycott Israel check, the firearm and ammunition industry discrimination check, the energy company boycott check, and the vendor’s warrant hold status. Failure to conduct these checks can lead to the improper award of a contract.

Proper Procedure

The vendor compliance verifications must be performed before the agency contracts with a vendor. A dated copy of the verifications must be retained in the procurement file.

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Debarment check: Texas Government Code, Section 2155.077.
System for Award Management check: presidential executive order 13244.
Iran, Sudan and foreign terrorist list organization check: Texas Government Code, Sections 2252.001(2) and 2252.152.
Boycott Israel check: Texas Government Code, Sections 2270.0001(3) and 2271.002.
Warrant/payment hold check: eXpendit – Restricted Expenditures – Persons Indebted to the State and Texas Government Code, Section 2252.903.
Firearm and Ammunition Industries Discrimination Check: Texas Government Code, Section 2274.002(b).
Energy Company Boycott Check: Texas Government Code, Section 2276.002(b).

2. Missing Warrant Hold Checks Documentation

The Issue

State agencies fail to perform warrant hold verifications on payment card purchases over $500.

Proper Procedure

State agencies are required to verify a vendor’s warrant hold status for payment card purchases over $500. If a vendor is on warrant hold, agencies must not purchase from the vendor until the hold has been released.

Find Out More

State of Texas Procurement and Contract Management Guide – Warrant/Payment Hold Check
Texas Government Code, Section 2252.903
eXpendit – Persons Indebted to the State

3. Failure to Report Contract to the Legislative Budget Board

The Issue

State agencies do not report contracts or contract amendments valued more than $50,000 to the Legislative Budget Board (LBB). This can hamper the ability of oversight agencies to monitor state contracting efforts.

Proper Procedure

State agencies receiving appropriations under the General Appropriations Act (GAA) must report all contracts over $50,000 to the LBB, including contracts for which only non-appropriated funds will be expended. The submission must include documentation such as the award, solicitation documents, renewals, amendments, addendums, extensions, attestation letters and other records.

Find Out More

See GAA, Article IX, Section 7.04(c) PDF and the LBB contract reporting guide PDF.

4. Failure to Report to the Vendor Performance Tracking System

The Issue

State agencies or universities fail to report vendor performance for contracts over $25,000 to the Vendor Performance Tracking System (VPTS).

Proper Procedure

After a contract is completed or otherwise terminated, each state agency must review the vendor’s performance under the contract. State agencies (and institutions of higher education for contracts that started before Sept. 1, 2021) must report purchases and contracts over $25,000 to VPTS to identify supplier performance, which helps aid purchasers in making a best value determination based on vendor past performance and protect the state from vendors with unethical business practices. State agencies submit their vendor performance electronically via the Statewide Procurement Division website.

If the value of the contract exceeds $5 million there are additional requirements. The state agency shall review the vendor’s performance:

At least once each year during the term of the contract.
At each key milestone identified for the contract.

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5. Missing State Auditor’s Office (SAO) Nepotism Disclosure Statement

The Issue

State agencies failed to have procurement employees complete and sign the SAO nepotism disclosure statement forms.

Proper Procedure

The State Auditor’s office defines purchasing personnel as employees of a state agency who make decisions on behalf of the agency, such as:

Contract terms or conditions on a major contract.
Who is to be awarded a major contract.
Preparation of a solicitation for a major contract.
Evaluation of a bid or proposal.

The department must ensure all procurement personnel involved in awarding contracts of at least $1 million sign the SAO disclosure statement for purchasing personnel. The signed statements must be retained in the contract file.

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6. Missing Ethics Certificate of Interested Parties (Form 1295)

The Issue

State agencies failed to have the required Texas Ethics Commission (TEC) Certificate of Interested Parties (Form 1295) before a contract is awarded.

Proper Procedure

Before contract award, the vendor must give the agency a completed, signed form with the certificate of filing number and date. The contract developer must acknowledge the form on the TEC website. It is best practice to mention Form 1295 in the solicitation to give the vendor time to gather the required information early in the process. State agencies must ensure any vendor involved in contract awards of $1 million or more completes Form 1295 on the TEC website, unless the type of contract involved is exempt from this requirement.

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7. Incorrect Procurement Method Used (Missing SPA, TCI, DIR or WorkQuest)

The Issue

State agencies failed to identify and select the correct procurement method for their agency’s purchase.

Proper Procedure

Incorrect procurement methods do not provide the best value to the state, are likely to be more expensive and less efficient than the correct method, and in the worst case, may result in a void contract that must be resolicited.

Texas law requires agencies to award contracts only to responsive vendors providing the best value to the state. The best value standard may vary depending on the procurement method, so public procurement personnel must ensure agencies use the appropriate best value standard as the basis for each contract award. The State of Texas Procurement and Contract Management Guide describes the process for selecting the appropriate procurement method and provides details for the following resources:

Department of Information Resources (DIR)
Texas Correctional Industries (TCI)
State Use Program (WorkQuest)
Statewide Procurement Division (SPD) term contracts

State agencies are required to purchase goods and services from TCI or WorkQuest unless they meet exception requirements and obtain applicable waivers. Agencies may obtain an exemption or waiver from the requirement to use a DIR contract to purchase an information technology commodity item.

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8. Prompt Payment and Payment Scheduling Errors

The Issue

State agencies fail to make timely payments, which results in overdue payments and interest owed to vendors. Additionally, agencies schedule payments too early, leading to lost interest for the state treasury.

Proper Procedure

A state agency’s payment is due on the 30th day after the latest of:

The date the agency receives the goods under the contract.
The date the performance of the contracted service is completed.
The date the agency receives an invoice for the goods or services.

A state agency is liable for any interest that accrues on an overdue payment under the prompt payment law. Interest starts accruing on the date the payment becomes overdue.

Payments over $5,000 must be scheduled for distribution 30 days from the last received, either the invoice or completion of services/receipt of goods, or:

As prescribed by the contracts or specific arrangements covering the payments.
On the last day a payment can be made without accruing interest under the prompt payment law.

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9. Incorrect Longevity Payment/Reimbursement

The Issue

State agencies fail to verify prior state service when calculating employee state effective service dates. This can result in incorrect longevity payments/reimbursements.

Proper Procedure

A state agency must verify prior state service for employees to ensure they are receiving state service credit and payments for all eligible periods of state employment. State agencies should recover overpayments made to employees if it is cost-effective to do so. State agencies must also compensate employees who were underpaid longevity pay.

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10. Lack of Conservation of State Funds

The Issue

State agencies reimburse a board member or employees for travel expenses without conducting a cost comparison in advance to determine the lowest-cost method of travel.

Proper Procedure

State agencies must ensure staff members, including board members, perform and document cost comparisons for different travel methods (e.g., personally owned vehicles, rental vehicles, fleet vehicles, commercial airlines, etc.) before making travel arrangements. When a traveler chooses a more costly option, the traveler must justify and document the choice with any contributing factors and indirect cost savings and include the justification with the cost comparison.

State agencies must verify the traveler completes and includes the cost comparison and justification on the travel voucher and retains it with the travel documentation. State agencies should require a traveler to complete a cost analysis before management approves travel plans to ensure the most cost-effective travel method is used. State agencies may use the rental vehicle vs. mileage reimbursement calculator.