MANAGEMENT REPORT DEPARTMENT OF DEFENSE AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 1999 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS 254 WASHINGTON STREET ATLANTA, GEORGIA 30334-8400 DEPARTMENT OF DEFENSE MANAGEMENT REPORT - TABLE OF CONTENTS - LETTER OF TRANSMITTAL SECTION I SELECTED FINANCIAL INFORMATION EXHIBITS A ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND 1 B SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND 2 SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS RussELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 September 27, 1999 Honorable Roy E. Barnes, Governor Members ofthe General Assembly of Georgia and Honorable David B. Poythress, Adjutant General Department of Defense Ladies and Gentlemen: As part ofour audit of the statutory basis financial statements ofthe State of Georgia presented in the State of Georgia Report of the State Auditor, the general purpose financial statements of the State of Georgia presented in the State ofGeorgia Comprehensive Annual Financial Report, and the issuance of a Statewide Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 1999, we have performed certain audit procedures at the Department of Defense. Accordingly, the financial statements and compliance activities of the Department ofDefense were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996. This Management Report contains information pertinent to the financial and compliance activities of the Department of Defense as of and for the year ended June 30, 1999. The particular information provided is enumerated in the Table of Contents. This report is intended solely for the information and use of management of the Department of Defense and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp State Auditor SECTION I SELECTED FINANCIAL INFORMATION DEPARTMENT OF DEFENSE ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND YEAR ENDED JUNE 30, 1999 FUND BALANCE - JULY 1, 1998 Reserved Surplus ADDITIONS Adjustments to Prior Year's Accounts Payable Excess of Funds Available over Expenditures Exhibit "B" Reimbursement of Prior Year's Expenditures DEDUCTIONS Unreserved Fund Balance (Surplus) Returned to Office of Treasury and Fiscal Services Year Ended June 30, 1998 Adjustments to Prior Year's Accounts Receivable Refund of Unexpended Funds to Granter Reserved Fund Balance Carried Over from Prior Year as Funds Available FUND BALANCE - JUNE 30, 1999 SUMMARY OF FUND BALANCE Reserved Federal Financial Assistance Armory Funds Billeting Funds Youth Challenge Program Donations Elberton Training Center Surplus - 1- EXHIBIT "A" $ 1,761,810.13 50,364.62 $ 1,812,174.75 $ 75,030.60 1,240,516.75 1,011.70 $ 1,316,559.05 $ 50,364.62 15,929.05 91,568.19 1,761,810.13 $ 1,919,671.99 $ 1,209,061.81 $ 668,181.48 204,670.28 150,360.31 645.00 125,000.00 $ 1,148,857.07 60,204.74 $ 1,209,061.81 DEPARTMENT OF DEFENSE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND YEAR ENDED JUNE 30, 1999 EXHIBIT"B" FUNDS AVAILABLE REVENUES State Appropriation Federal Revenues Other Revenues Retained CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 5,591,747.00 $ 5,591,747.00 $ 20,322, 190.00 17,418,438.60 1,594,496.00 1,135,672.31 $ 27,508,433.00 $ 24,145,857.91 $ 0.00 -2,903,751.40 -458,823.69 -3,362,575.09 0.00 1,761,810.13 1,761,810.13 $ 27,508,433.00 $ 25,907,668.04 $ -1,600,764.96 EXPENDITURES Personal Services Regular Operating Expenses Travel Motor Vehicle Purchases Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Year 2000 Project Excess of Funds Available over Expenditures $ 11,925,684.00 $ 11,091,494.36 $ 10,784,228.00 9,381,354.59 85,960.00 74,131.76 2,518.00 2,518.00 16,764.00 16,124.79 265,569.00 265,691.41 74,743.00 53,945.01 2,473,685.00 1,952,910.27 1,804,812.00 1,763,746.98 74,470.00 65,234.12 834,189.64 1,402,873.41 11,828.24 0.00 639.21 -122.41 20,797.99 520,774.73 41,065.02 9,235.88 $ 27,508,433.00 $ 24,667,151.29 $ 2,841,281.71 ----'----'--- $ 1,240,516.75 $ ====1::1::,2=4:::!0'=51=6=7.=5 -2- SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS DEPARTMENT OF DEFENSE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1999 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS fuadequacies in Bank Reconciliation Procedures Finding Control Number: FS-411-99-01 The Department ofDefense's accounting procedures were not sufficient to provide for adequate control over the bank reconciliation process. Engagement procedures and interviews with personnel of the Department revealed that a bank reconciliation of the Payroll Account was not performed for the month ofJune, 1999, and that bank reconciliations for the General Operating Account were not performed for the months of April, May and June, 1999. As a result, as of June 30, 1999, our examination ofthe Payroll and General Operating Accounts identified unreconciled differences of$130,693.55 and $1,466.92, respectively, between the amount recorded on the general ledger and the bank statements. The Department should establish the necessary procedures to ensure that bank reconciliations for the Payroll and General Operating Accounts are reconciled on a monthly basis. The Department should take action to identify the unreconciled differences and make adjustments to the accounting records where appropriate.