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652 Pages·2015·6.33 MB·English

by  Charnetha Grayson

State of Texas
Federal Portion of the
Statewide Single
Audit Report
for the
Fiscal Year Ended
August 31, 2014
Report No. 15-313
Table of Contents

Independent Auditor’s Report on the Schedule
of Expenditures of Federal Awards ............................................................................................................................. 1

Independent Auditors’ Report on Compliance for Each Major Program and Report on Internal Control
Over Compliance Required by OMB Circular A-133 ................................................................................................. 2

Schedule of Expenditures of Federal Awards ............................................................................................................. 21

Notes to Schedule of Expenditures of Federal Awards ............................................................................................. 171

Schedule of Findings and Questioned Costs

Section 1:
Summary of Auditors’ Results .................................................................................................................................. 177

Section 2:
Financial Statement Findings .................................................................................................................................... 181

Section 3a:
Federal Award Findings and Questioned Costs – KPMG ......................................................................................... 183

Section 3b:
Federal Award Findings and Questioned Costs – Other Auditors ............................................................................ 232

Summary Schedule of Prior Audit Findings – KPMG .............................................................................................. 388

Summary Schedule of Prior Audit Findings – Other Auditors ................................................................................. 430
Independent Auditors’ Reports
Federal Portion of
Statewide Single Audit Report
For the Year Ended August 31, 2014

KPMG LLP
Suite 1900
111 Congress Avenue
Austin, TX 78701-4091

Independent Auditors’ Report on Compliance
for Each Major Program and Report on Internal Control Over
Compliance Required by OMB Circular A-133

The Honorable Greg Abbott, Governor,
The Honorable Dan Patrick, Lieutenant Governor,
The Honorable Joe Straus, Speaker of the House of Representatives,
Members of the State Legislature, State of Texas

Report on Compliance for Each Major Federal Program

We have audited the State of Texas’ (the State) compliance with the types of compliance requirements described in
the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the State’s
major federal programs for the year ended August 31, 2014. The State’s major federal programs are identified in the
summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

The State’s financial statements include the operations of OneStar National Service Commission, Texas Health
Insurance Risk Pool, Texas Boll Weevil Eradications Foundation, Inc., Texas State Affordable Housing
Corporation, and Teacher Retirement System of Texas (the component units of the State), which received
approximately $105 million in federal awards which is not included in the schedule of expenditures of federal
awards for the year ended August 31, 2014. Our audit, described below, did not include the operations of the
component units of the State because each of those component units has engaged other auditors to perform an audit
in accordance with OMB Circular A-133, if applicable.

Management’s Responsibility

Management of the State Agencies and Universities are responsible for compliance with the requirements of laws,
regulations, contracts, and grants applicable to its federal programs.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of the State’s major federal programs based on
our audit of the types of compliance requirements referred to above. We did not audit the State’s compliance with
the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have
a direct and material effect on the Student Financial Assistance Cluster, Research and Development Cluster, CFDA
66.458 – Capitalization Grants for Clean Water State Revolving Funds, CFDA 66.468 – Capitalization Grants for
Drinking Water State Revolving Funds, CFDA 97.036 – Disaster Grants-Public Assistance (Presidentially Declared
Disasters), CFDA-97.067 – Homeland Security Grant Program, CFDA 20.233 – Border Enforcement Grants, and
the Highway Planning and Construction Cluster major federal programs (the other auditor major federal programs)
which represent approximately 19% of total federal assistance received by the State for the year ended August 31,
2014. The other auditor’s major federal programs are identified in the accompanying schedule of findings and
questioned costs as major federal programs and were audited by another auditor whose reports have been furnished
to us, and our opinion, insofar as it relates to the other auditor’s major federal programs is based solely on the
reports of the other auditor. We conducted our audit of compliance in accordance with auditing standards generally
accepted in the United States of America; the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that
we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of
compliance requirements referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the State’s compliance with those
requirements and performing such other procedures as we considered necessary in the circumstances.
2
KPMG LLP is a Delaware limited liability partnership,
the U.S. member firm of KPMG International Cooperative
(“KPMG International”), a Swiss entity.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
unmodified and modified audit opinions on compliance. However, our audit does not provide a legal determination
of the State’s compliance.

Basis for Qualified Opinions

As identified below and described in the accompanying schedule of findings and questioned costs, the State did not
comply with requirements regarding the following:

Compliance Finding
Agency/University Major Program Requirement Number

General Land Office CDBG – State–Administered Davis – Bacon Act 2014-005
CDBG Cluster Subrecipient Monitoring

Health and Human Services TANF Cluster Subrecipient Monitoring 2014-007
Commission

Health and Human Services Medicaid Cluster Special Tests and Provisions 2014-014
Commission – Provider Eligibility
Department of Aging and
Disability Services

University of North Texas Student Financial Assistance Eligibility 2014-146
Cluster Special Tests and Provisions
– Institutional Eligibility

University of Texas at Student Financial Assistance Eligibility 2014-148
Arlington Cluster Activities Allowed or
Unallowed
Cash Management
Period of Availability of
Federal Funds
Reporting
Special Tests and Provisions
– Separate Funds
Special Tests and Provisions
– Borrower Data
Transmission and
Reconciliation (Direct
Loan)
Special Tests and Provisions
– Institutional Eligibility

Compliance with such requirements is necessary, in our opinion and the opinion of the other auditor, for the State to
comply with the requirements applicable to that program.

Qualified Opinions

In our opinion, based on our audit and the reports of the other auditor, except for the noncompliance described in the
Basis for Qualified Opinions paragraph, the State complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of the major programs identified
in the Basis for Qualified Opinions paragraph for the year ended August 31, 2014.
3
Un modified Opinions on Each of the Other Major Federal Programs

In our opinion, based on our audit and the reports of the other auditor, the State complied, in all material respects,
with the types of compliance requirements referred to above that could have a direct and material effect on each of
its other major federal programs for the year ended August 31, 2014.

Other Matters

The results of our auditing procedures and the reports of the other auditor disclosed other instances of
noncompliance, which are required to be reported in accordance with OMB Circular A-133 and which are described
in the accompanying schedule of findings and questioned costs as items:

Compliance Finding
Agency/University Major Program Requirement Number

Department of Aging and Aging Cluster Matching, Level of Effort, 2014-001
Disability Services Earmarking
Reporting
Subrecipient Monitoring

Period of Availability of 2014-002
Federal Funds
Reporting

Department of Assistive CFDA 84.126 – Rehabilitation Eligibility 2014-003
Rehabilitative Services Services – Vocational
Rehabilitation Grants to States

Department of Family and CFDA 93.658 – Foster Care Title Reporting 2014-004
Protective Services IV–E

Health and Human Services TANF Cluster Special Tests and 2014-008
Commission Provisions – Child
Support Non–
Cooperation

SNAP Cluster Special Tests and 2014-009
Provisions – EBT Card
Security

Health and Human Services CFDA 10.557 – Special Subrecipient Monitoring 2014-013
Commission Supplemental Nutrition
Department of Aging and Program for Women, Infants,
Disability Services and Children
Department of State Health CFDA 93.667 – Social Services
Services Block Grant
CFDA 93.917 – HIV Care
Formula Grants
CFDA 93.959 – Block Grants for
Prevention and Treatment of
Substance Abuse
Aging Cluster
TANF Cluster

4
Compliance Finding
Agency/University Major Program Requirement Number

Health and Human Services Medicaid Cluster Special Tests and 2014-015
Commission Provisions – Provider
Department of Aging and Health and Safety
Disability Services Standards
Department of State Health
Services

Office of Attorney General CFDA 16.576 – Crime Victim Allowable Costs/Cost 2014-016
Compensation Principles

Department of State Health CFDA 10.557 – Special Reporting 2014-018
Services Supplemental Nutrition
Program for Women, Infants,
and Children
CFDA 93.268 – Immunization
Cooperative Agreements

CFDA 93.667 – Social Services Matching, Level of Effort, 2014-019
Block Grant Earmarking
Subrecipient Monitoring

Texas Higher Education CFDA 84.032L – Federal Family Special Tests and 2014-022
Coordinating Board Education Loans (Lenders) Provisions – Individual
Record Review
Special Tests and
Provisions – Enrollment
Reports

Texas Workforce CFDA 17.225 – Unemployment Special Tests and 2014-025
Commission Insurance Provisions – UI Benefit
Payments

Special Tests and 2014-026
Provisions – UC
Program Integrity–
Overpayments

Prairie View A&M Student Financial Assistance Eligibility 2014-101
University Cluster

Special Tests and 2014-102
Provisions –
Verification

Special Tests and 2014-103
Provisions –
Disbursements To or
On Behalf of Students
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Compliance Finding
Agency/University Major Program Requirement Number

Department of Public Safety CFDA 20.233 – Border Activities Allowed or 2014-104
Enforcement Grants Unallowed
Allowable Costs/Cost
Principles
Period of Availability of
Federal Funds

Reporting 2014-105

CFDA 97.036 – Disaster Grants – Activities Allowed or 2014-106
Public Assistance Unallowed
(Presidentially Declared Allowable Costs/Cost
Disasters) Principles

Procurement and 2014-107
Suspension and
Debarment
Subrecipient Monitoring
Cash Management
Special Tests and
Provisions – Project
Accounting

Reporting 2014-108

CFDA 97.067 – Homeland Activities Allowed or 2014-109
Security Grant Program Unallowed
Allowable Costs/Cost
Principles

Period of Availability of 2014-111
Federal Funds

Reporting 2014-112

Subrecipient Monitoring 2014-113
Special Tests and
Provisions – Subgrant
Awards

Texas A&M International Student Financial Assistance Eligibility 2014-114
University Cluster

Texas A&M University Student Financial Assistance Eligibility 2014-115
Cluster

Texas A&M University – Research and Development Reporting 2014-117
Corpus Christi Cluster
6
Compliance Finding
Agency/University Major Program Requirement Number

Texas A&M University – Student Financial Assistance Eligibility 2014-118
Kingsville Cluster

Special Tests and 2014-119
Provisions –
Verification

Texas A&M University – Student Financial Assistance Eligibility 2014-120
Texarkana Cluster

Special Tests and 2014-121
Provisions –
Verification

Texas State Technical Student Financial Assistance Eligibility 2014-122
College – Marshall Cluster Special Tests and
Provisions –
Verification

Texas State University Student Financial Assistance Special Tests and 2014-123
Cluster Provisions –
Verification

Special Tests and 2014-124
Provisions – Return of
Title IV Funds

Special Tests and 2014-125
Provisions – Enrollment
Reporting

Texas Tech University Student Financial Assistance Cash Management 2014-126
Cluster

Eligibility 2014-127

Special Tests and 2014-128
Provisions –
Verification

Special Tests and 2014-129
Provisions – Enrollment
Reporting

Research and Development Reporting 2014-130
Cluster

Department of Highway Planning and Davis – Bacon Act 2014-132
Transportation Construction Cluster
Highway Planning and
Construction Cluster – ARRA
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