|(a) Internal Auditor.
(1) The Board shall appoint an internal auditor.
(2) The internal auditor shall report directly to the
Board on all matters except for those administrative matters that
require the decision of the Commissioner.
(3) The Board shall receive the advice and counsel
of the Commissioner regarding matters of termination, discipline,
transfer, or reclassification or changes in powers, duties or responsibilities
of the internal auditor.
(4) The internal auditor shall develop an annual audit
plan, conduct audits as specified in the audit plan and document deviations,
and discuss audit reports with the Administration and Financial Planning
Committee of the Board.
(5) The internal auditor shall provide all audit reports
directly to the Board.
(b) Compliance Monitoring.
(1) Definitions. The following words and terms, when
used in this section, shall have the following meaning:
(A) Board--The Texas Higher Education Coordinating
(B) Commissioner--The Commissioner of Higher Education,
the Chief Executive Officer of the Board.
(C) Institution of Higher Education--Defined in Texas
Education Code, §61.003.
(D) Private or Independent Institution of Higher Education--Defined
in Texas Education Code, §61.003.
(E) Student Financial Assistance--Includes grants,
scholarships, loans, and work study.
(F) Desk review--An administrative review by the Board
that is based on information reported by an institution of higher
education or private or independent institution of higher education,
including supplemental information required by the Board for the purposes
of compliance monitoring, except that the term does not include information
or accompanying notes gathered by the Board during a site visit.
(G) Site visit--An announced or unannounced in-person
visit by a representative of the Board to an institution of higher
education or private or independent institution of higher education
for the purposes of compliance monitoring.
(2) Purpose. The purpose of the Board's risk assessment
process and compliance methodologies is to maximize the effectiveness
of monitoring funds allocated by the Board and data reported to the
Board. The agency-wide, risk-based compliance monitoring function
is established for:
(A) funds allocated by the Board to institutions of
higher education, private or independent institutions of higher education,
and other entities, including student financial assistance funds,
academic support grants, and any other grants, to ensure that those
funds are distributed in accordance with applicable law and Board
(B) data reported by institutions of higher education
to the Board and used by the Board for funding or policymaking decisions,
including data used for formula funding allocations, to ensure the
data are accurately and consistently reported.
(3) After considering potential risks and the Board's
resources, the Board shall review a reasonable portion of the total
funds allocated by the Board and of data reported to the Board. The
Board shall use various levels of monitoring, according to risk, ranging
from checking reported data for errors and inconsistencies to conducting
comprehensive audits, including site visits. Audit methodology shall
be commensurate with the assessed risk.
(4) The Board's risk-based approach shall be implemented
to address the diversity of institutions of higher education and private
or independent institutions of higher education in Texas. The Board
shall develop audit and compliance monitoring methodologies, such
as Desk Reviews and data analysis, that are commensurate with assessed
risk and that are reflective of institutional differences. The Board's
risk-based approach to compliance monitoring shall consider the following
factors relating to an institution of higher education or private
or independent institution of higher education:
(A) the amount of student financial assistance or grant
funds allocated to the institution by the Board;
(B) whether the institution is required to obtain and
submit an independent audit;
(C) the institution's internal controls;
(D) the length of time since the institution's last
desk review or site visit;
(E) past misuse of funds or misreported data by the
(F) in regard to data verification, whether the data
reported to the Board by the institution is used for determining funding
(G) other factors as considered appropriate by the
(5) The annual compliance monitoring plan that results
from the Board's risk assessment shall be presented to the Board's
Agency Operations Committee each July, seeking approval of the plan
for the following fiscal year. Significant changes to the annual plan
that may occur during each fiscal year shall be presented for ratification
at the next scheduled Agency Operations Committee meeting.
(6) The Board shall train compliance monitoring staff
to ensure that the staff has the ability to monitor both funds compliance
and data reporting accuracy. Program staff in other Board divisions
who conduct limited monitoring and contract administration shall coordinate
with the compliance monitoring function to identify risks and avoid
(7) If the Board determines through its compliance
monitoring function that funds awarded by the Board to an institution
of higher education or private or independent institution of higher
education have been misused or misallocated by the institution, the
Board shall present its determination to the institution's governing
board and chief executive officer, or to the institution's chief executive
officer if the institution is a private or independent institution
of higher education, and provide an opportunity for a response from
the institution. Following the opportunity for response, the Board
shall report its determination and the institution's response, together
with any recommendations, to the institution's governing board or
chief executive officer, as applicable, the governor, and the Legislative
(8) If the Board determines through its compliance
monitoring function that an institution of higher education has included
errors in the institution's data reported for formula funding, the
(A) for a public junior college, may adjust the appropriations
made to the college for a fiscal year as necessary to account for
the corrected data; and
(B) for a general academic teaching institution, a
medical and dental unit, or a public technical institute, shall calculate
a revised appropriation amount for the applicable fiscal year based
on the corrected data and report that revised amount to the governor
and Legislative Budget Board for consideration as the basis for budget
execution or other appropriate action, and to the comptroller.
(9) To the extent not prohibited by law or other external
provision, the Board shall eliminate requirements of institutions
to conduct audits of funds administered by the Board as defined in
this subsection. In conducting the compliance monitoring function,
the Board may partner with internal audit offices at institutions
of higher education and private or independent institutions of higher
education, as institutional resources allow, to examine the institutions'
use of funds allocated by, and data reported to, the Board. To avoid
duplication of effort and assist the Board in identifying risk, an
internal auditor at an institution shall notify the Board of any audits
conducted by the auditor or other third party auditors involving funds
administered by the Board or data reported to the Board, as defined
in this subsection. Such notification shall include a copy of the
final audit report being sent to the Board's Director, Internal Audit
and Compliance, within 30 days of the date such final audit reports
are sent to the institution's governing board and/or chief executive
officer, the Texas State Auditor's Office, the Governor's Office,
the Legislative Budget Board, or other similar stakeholders. The final
audit report should be addressed to: Texas Higher Education Coordinating
Board, Director, Internal Audit and Compliance, 1200 East Anderson
Lane, Austin, Texas 78752.
(10) Private or independent institutions of higher
education must provide to the Board the institution's external audit
involving funds administered by the Board. The private or independent
institution of higher education's external audit must comply with
the Board's rules under this subchapter for auditing those funds.
(11) The Board may seek technical assistance from the
state auditor in establishing the compliance monitoring function.
The state auditor may periodically audit the Board's compliance monitoring
function as the state auditor considers appropriate.