15 Common Errors
13 Years and Counting, Post-payment
Audits Keep Agencies on Track
To help agencies make squeaky-clean payments, the Texas Comptroller of Public Accounts has compiled 15 of the most common errors found during audits in the past year.
By following the recommendations accompanying the errors spotlighted in this article, agencies can:
Comply with state laws and rules regarding expenditures
Improve internal controls, and
Avoid future audit findings.
Agencies must keep all documentation proving that expenditures are legal, proper, and fiscally responsible. Each type of expenditure has different documentation requirements.
Recommendation/Requirement: For purchase expenditures, agencies must generally keep sufficient information so that auditors can determine what was purchased, the price agreed upon before purchase, that the goods and services were received, and whether the coding for the expenditure was correct. Examples of required documentation include invoices, contracts, purchase orders, requisitions, receiving reports, and receipts. A three-way match must be performed on the purchase agreement, invoice, and receiving report to ensure information on them matches. See 34 Tex. Admin. Code § 5.51 (e) (3) (2005).
The documentation required for purchase transactions is also needed for payment card transactions. The only difference is that for point-of-sales purchases, the vendor receipt provided at the time of purchase may represent all three parts of the three-way match. See Tex. Admin. Code § 5.57 (q) (2005). Agencies must ensure that they retain all supporting documentation for payment card purchases and do not violate any pertinent rules or laws.
Generally agencies must keep original vouchers and required receipts that support the amounts claimed on travel vouchers. See applicable sections of the State of Texas Travel Allowance Guide.
For payroll expenditures, agencies must keep personnel action forms, employee leave records, documentation of scheduled work hours, documentation concerning overtime pay and compensatory time paid, authorization for leveling BRP, direct deposit information, documentation that verifies Social Security Number, documentation to show eligibility for any special pays, and payroll detail for the payroll document. See the Payroll Policies and Procedure Guide, Page 1.36.
Duplicate payments and reimbursements
In some instances, agencies have made duplicate payments to its vendors or have made duplicate reimbursements to their funds held outside the Texas treasury. These payments are difficult to identify on an individual basis; however, through monthly and quarterly monitoring reports, these duplicate payments and reimbursements can be identified.
Recommendation/Requirement: Agencies should develop reports to monitor their payments monthly, and quarterly to identify duplicate payments and reimbursements. Agencies should enhance internal controls to identify and prevent duplicate payments and reimbursements.
Agencies must pay vendors according to the terms agreed upon in a purchase order or contract. Agencies may not pay more than the agreed-upon amount unless the vendor provides additional consideration.
Recommendation/Requirement: Be sure to contact the vendor before making payment to resolve any discrepancies that exist between the purchase order or contract, the invoice, and the receiving report — and don't forget to properly document the resolution of any issues.
Payments past the prompt payment deadline
State law says that payments to vendors for goods or services are due on the 30th day after the latest of the following dates: the date the goods are received, the date the service is completed, or the date the invoice is received. If the payment is distributed late, then interest is automatically added to the principal amount.
Recommendation/Requirement: Submit payment vouchers through internal accounting systems and through the Uniform Statewide Accounting System (USAS) well before the payments need to be distributed. See Tex. Gov't Code Ann. § 2251.026 (Vernon 2000).
Not properly removing officers' and employees' abilities to approve expenditures
Many agencies are not ensuring that the personnel responsible for maintaining signature cards and security (i.e., security coordinators) know ahead of time when employees are terminated or reassigned.
Recommendation/Requirement: Notify the Comptroller's office of a designated employee's termination no later than the fifth day after the effective date of the termination. See 34 Tex. Admin. Code § 5.61 (k) (3) (B) (2005). Ensure that the person's authority to electronically approve the agency's expenditures is removed no later than the effective date of the revocation. See 34 Tex. Admin. Code § 5.61 (k) (5) (B) (2005).
Controls over expenditure processing
In some circumstances, agencies have given employees the ability to process expenditures without oversight by another agency employee. An agency that has staff with security that allows them to process expenditures without oversight is taking greater risk with its funds than an agency that has approval controls in place.
Recommendation/Requirement: Agencies should review the controls over expenditure processing and segregate each task to the extent possible to ensure that no individual is able to process payments without oversight. Agencies should establish and document mitigating controls where this segregation is not possible.
Invalid longevity pay
Employees are entitled to $20 longevity pay for every two years of state service. Some agencies miscalculate state service time. In most cases, the miscalculation is caused by the agency failing to verify and obtain documentation of previous state service at other state agencies. See Tex. Gov't Code Ann. § 659.043 (a) (1) (Vernon Supp. 2004).
Recommendation/Requirement: Determine the number of years each employee has worked for the state to arrive at the amount of longevity pay for that employee. If an employee has worked at another state agency in the past, the agency must contact the previous agency to confirm employment dates.
Invalid benefit replacement pay
"Eligible state employee" means an individual who was on Aug. 31, 1995, employed by a state agency and eligible for state payment of the employee tax under § 606.064 as that section existed on that date. Tex. Gov't Code Ann. § 659.121 (2) (A) (Vernon 2004). At the time most of our audit errors occurred, an eligible state employee who leaves state employment after Aug. 31, 1995, for at least 12 consecutive months, on returning to state employment or on assuming a state office, is ineligible to receive benefit replacement pay (BRP). See Tex. Gov't Code Ann. § 659.126(a) (Vernon 2004). Effective Sept. 1, 2005 an eligible state employee who leaves state employment after Aug. 31, 1995, for at least 30 consecutive days, on returning to state employment or on assuming a state office, is ineligible to receive benefit replacement pay.
Recommendation/Requirement: Verify all employees' employment history to determine which employees are eligible for BRP. If an employee has previously worked at a state agency, the agency must contact the previous agency to confirm employment dates.
Excessive amounts reimbursed for travel expense
Employees are limited to state rates when traveling. Currently, these limits are up to $36 per day for meal expenses and $85 per day for lodging expenses when traveling within Texas. Airfare and rental car transportation are limited to the rates listed in the Texas Building and Procurement Commission state contract. An agency may not pay for airfare and rental car transportation are exceeding the amount listed in the contract. See Tex. Gov't Code Ann. § 2171.056(b)(1) (Vernon 2000). As of the date of this publication Airfare Contracts have expired; however, this requirement will apply when the contracts are reinstated. When a TBPC state contract is not used, one of the eight approved exception conditions listed in 1 Tex. Admin. Code § 125.3 (2005) must exist, and the exception must appear on or be included with the travel voucher submitted to the Comptroller's office.
Recommendation/Requirement: See the State of Texas Travel Allowance Guide, which details the rules regarding how meal and lodging expenses may be reimbursed, and also refer to the Out-of-State Meal and Lodging Rates on FMX. Review all travel requests before the dates of travel to ensure that the airfare and rental car transportation are in compliance with the rates listed in the TBPC contract.
Section 4.03 of the State of Texas Travel Allowance Guide says that the number of reimbursable miles traveled by a state employee may not exceed the number of miles of the most cost effective route between the origin of the employee's travel and the employee's final destination. The number of miles of the shortest or most cost-effective route between two points, when both are listed in the Texas Mileage Guide, is the number of miles between those points as listed in the mileage guide or calculated from the employee's odometer. When an employee's odometer is used to determine the number of miles between points, the employee must properly itemize the mileage on a point-to-point basis to be reimbursed.
Recommendation/Requirement: Agencies should review travel vouchers to ensure that mileage claimed does not exceed the mileage listed in the Texas Mileage Guide if point-to point mileage is not claimed. View current and recent travel reimbursement rates, including information about recent mileage reimbursement rate changes.
Incorrect salary payment amount
State agencies shall not grant extra compensation to any officer, agent, or public contractor after such public services have been performed. These overpayments are discovered on the Uniform Statewide Payroll/Personnel System overpayment report and the Standardized Payroll/Personnel Reporting System gross exceeds report.
Recommendation/Requirement: Agencies should monitor the overpayments report each month to help identify incorrect salary payment amounts.
Improper payment of sales taxes
The state of Texas, its unincorporated agencies, and instrumentalities are exempt from sales taxes. Purchase, lease, or rental of a taxable item to an organization is tax exempt when an authorized agent pays for the taxable item and provides the vendor an exemption certificate in lieu of tax. See 34 Tex. Admin. Code § 3.322 (f) (2) (2005).
Recommendation/Requirement: Agencies must examine invoices to prevent payment of any sales taxes for which the agency is not liable. Agencies must notify all employees using payment cards that sales tax is not payable.
Purchase orders created after invoices
In many cases, agencies create a purchase order when they receive an invoice instead of when they make the original agreement with the vendor. Agencies are required to document all agreements at the time they are made.
Recommendation/Requirement: Document the agreement with the vendor at the time the goods or services are ordered. The agreement must specify the type, quantity, and price of goods or services.
Payments to vendors on warrant hold
A state agency may not use a petty cash account and may not reimburse an officer or employee from a petty cash account for a purchase from a vendor if the payment would be prohibited by warrant-hold statute. See 34 Tex. Admin. Code § 5.57(g)(6) (2005). USAS automatically checks vendor status for payments processed through it. However, any third party reimbursements for payments that are not originally processed through USAS may go to vendors on warrant hold.
Recommendation/Requirement: Agencies should develop procedures to verify whether the vendors it does business with are on warrant hold before making payments to them by petty cash.
Violation of state reporting requirements
In some instances universities are not current with reporting payroll/personnel information to the human resource information system (HRIS). Universities have a legal obligation to report information to HRIS as required by Tex. Gov't Code Ann. § 2101.0376 (Vernon 2000).
Recommendation/Requirement: Universities should establish and follow to completion a formal plan, including timelines, to accomplish accurate and timely reporting of the required payroll and personnel data.
For more information
Find quarterly summaries of post-payment audits conducted by the Comptroller's office on Fiscal Management's home page. The Comptroller's office hosts training related to many of the audit findings. For training schedules, visit the Training page on FMX (login required).
The supporting paperwork includes the invoice, copy of the “L” cover sheet, certifications and contracts. The State Comptroller’s Purchase Voucher Guide requires the following information be submitted regarding Special Payments:
Invoice or membership form;
Name of organization—No acronyms (spell it out);
Vendor identification number;
Period of membership- beginning and ending date;
Purpose or aims statement of the organization—in order to show benefit to the University;
New vendor - provide a W-9.
Professional and Institutional memberships must benefit the University and must not have political agendas or paid lobbyist.
This page was last updated on: May 16, 2012