Top 10 Audit Findings in Post-Payment Audits (2023)
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.
Find Out More
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 Prior State Service Forms/Incorrect Amount of Longevity Pay
The Issue
State agencies fail to verify prior state service when hiring leading to incorrect longevity payments. When agencies fail to verify prior state service, longevity payments are calculated incorrectly, and eligible employees are underpaid.
Proper Procedure
When hiring a new employee, agencies must:
- Research state of Texas employment history.
- Determine eligibility for longevity pay by verifying prior state service.
- Ensure the longevity payment is calculated correctly.
Find Out More
Texas Payroll/Personnel Resource – State of Texas Employment History Application
Texas Payroll/Personnel Resource – Longevity Pay
3. 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 universities 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 or universities 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 or university 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.
Find Out More
34 Texas Administrative Code, Section 20.115
Texas Government Code, Section 2155.089
Vendor Performance Tracking System
4. 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 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 General Appropriations Act (GAA), Article IX, Section 7.04(c) PDF and the LBB contract reporting guide PDF.
5. Lack of Controls Over Expenditure Processing
The Issue
State employees have the security access to perform multiple tasks in the statewide financial systems such as both entering and releasing payments through the Uniform Statewide Accounting System (USAS) without oversight, adjusting payment instructions in the Texas Identification Number System (TINS), approving vouchers and picking up warrants from the Comptroller’s office.
Proper Procedure
State agencies should implement controls over expenditure processing and segregate each task as much as possible.
Agencies can strengthen internal controls and reduce risks to state funds by:
- Updating preventive controls in USAS on the Agency Profile (D02) for all transactions.
- Requesting the USAS Risky Document Report (DAFR9840) that lists activities for all users, including any documents that were entered or altered and then released by the same user.
Find Out More
USAS Accounting and Payment Control (FPP B.005)
6. Missing/Incorrect SAO Nepotism Disclosure Statement
The Issue
State agencies fail to complete a nepotism disclosure statement when procuring a contract valued at $1 million or more, or have the form signed by the wrong individual. This can lead to an agency being unaware of a potential conflict of interest in a procurement decision.
Proper Procedure
For contracts valued at $1 million or more, all purchasing personnel working on a contract must disclose any relationship with the selected vendor to the administrative head of the agency on a form prescribed by the State Auditor’s Office.
Find Out More
Texas Government Code, Section 2262.004 requires state agency purchasers to disclose relationships that might pose a conflict of interest in awarding a major contract. See State of Texas Procurement and Contract Management Guide – Agency Review of Required Disclosures.
7. Incorrect/Improper Use of the Generic Texas Identification Number (TIN)
The Issue
State agencies or universities failed to use the correct TIN, or they used a generic TIN instead of the specific TIN assigned to a vendor.
Proper Procedure
State agencies and universities must make every effort to obtain (or set up) the specific vendor TIN when coding transactions for third-party payments, and the generic TIN should only be used after such efforts have been exhausted. Using the correct TIN is necessary to capture the actual vendor/individual doing business with the state, which enhances transparency about the state’s expenditures. Improper processing can result in inaccurate expenditure reporting for public information requests.
Find Out More
8. Failure to Notify Comptroller to Remove Employee from Signature Card/Failure to Request Security Access Removal
The Issue
State agencies or universities failed to notify the Comptroller’s office about the expired authority of an employee designated to approve expenditures.
Proper Procedure
When an employee’s authority to approve expenditures is revoked for any reason, the employee’s security profile must be changed no later than the effective date of the revocation or termination to prevent the employee from electronically approving payments for the agency.
For signature cards, whenever a designated employee terminates employment with an agency, the Comptroller’s office must receive notification of the employee’s termination no later than the fifth day after the effective date of the employee’s termination.
Find Out More
34 Texas Administrative Code Section 5.61(k)(5)(A)-(B)
34 Texas Administrative Code Section 5.61(k)(3)(B)
Expenditure Approvals and Certification (FPP B.007)
9. Incorrect Amount of Lump Sum Payments
The Issue
State agencies fail to calculate the lump sum payment for accrued vacation time correctly, resulting in an incorrect payment amount to the employee.
Proper Procedure
When making lump sum payments, agencies must:
- Verify calculations of lump sum payments, including all factors such as the base salary, number of vacation hours, termination date, hourly rates, holidays, and partial months.
- Enhance their internal controls to ensure correct vacation lump sum calculated payments.
Find Out More
Texas Government Code, Sections 661.061-068
Texas Payroll/Personnel Resource – Lump Sum Payment of Accrued Vacation Time
10. Missing/Insufficient Supporting Documentation (Purchase & Travel)
The Issue
Agency documentation for purchases and travel expenses is missing or insufficient. Without supporting documentation, a purchase or travel expense and the corresponding data entered into the Uniform Statewide Accounting System (USAS) cannot be validated.
Proper Procedure
Agencies must maintain supporting documentation in their files to support the legality and fiscal responsibility of each payment that results from either a purchase or a travel expense.
Examples of required documentation include:
- Invoice.
- Purchase order (PO).
- Contract (including supporting procurement documentation).
- Receiving report (for PO).
- Travel voucher.
- Receipts.
- Other supporting documents for travel expenses.