Management report, Department of Defense, an organizational unit of the state of Georgia, year ended June 30, 2004

STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor
MANAGEMENT REPORT DEPARTMENT OF DEFENSE AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 2004

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

DEPARTMENT OF AUDITS AND ACCOUNTS

254 Washington Street, S.W., Suite 214

w. RUSSELL

HINTON

STATE AUDITOR

(404) 656-2174

Atlanta, Georgia 30334-8400

January 24, 2005

Honorable Sonny Perdue, Governor

,

Members of the General Assembly of Georgia

and

Honorable David B. Poythress, Adjutant General

Ladies and Gentlemen:

As part of our audit of the statutory basis financial statements of the State of Georgia presented in the State of Georgia Report of the State Auditor, the basic financial statements of the State of Georgia presented in the State of Georgia 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, 2004, we have performed certain audit procedures at the Department of Defense. Accordingly, the financial statements and compliance activities of the Department of Defense were examined to the extent 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 controls 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, 2004. 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 State of Georgia and members of the Board and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,

RWH:mlr

SECTION I SELECTED FINANCIAL INFORMATION

DEPARTMENT OF DEFENSE ANALYSIS OF CHANGES IN FUND BALANCE
BUDGET FUND YEAR ENDED JUNE 30, 2004

EXHIBIT"A"

FUND BALANCE - JULY 11 2003
Reserved Surplus
ADDITIONS
Adjustments to Prior Year's Accounts Payable Excess of Funds Available over Expenditures
Exhibit"B"
DEDUCTIONS
Unreserved Fund Balance (Surplus) Returned to Office of Treasury and Fiscal Services Year Ended June 30, 2003
Adjustments to Prior Year's Accounts Receivable
Reserved Fund Balance Carried Over from Prior Year as Funds Available
Refunds to Granters

$

4,571,592.06

17,999.00

$ -----'-'4,:.,;;,.58.::...;9:...,_,5::....:9:....:.1..:...:.0~6

$

30,108.00

5,117,818.91

$ _ _ _5.c..,.c.14.:..;7.i.:,9:.:2:.:.6=.9-"-1

$

17,999.00

64,991.74

4,571,592.06 100,562.06

$ _ _ _4_.,_75;;_;5c.c.1,;_;4:..:.4..;,.8.c..6

FUND BALANCE - JUNE 30, 2004
SUMMARY OF FUND BALANCE Reserved Federal Financial Assistance Youth Challenge Program Donations Billeting Funds Armory Funds
Surplus

$

4,982,373.11

$

3,938,858.59

645.00

750,121.37

280,970.76

$

4,970,595.72

11,777.39

$ ===4,.;,,:~98;;;;2~,3;.;7.,;;3,;,.;.1..;..1 -1-

DEPARTMENT OF DEFENSE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30, 2004

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)

$

7,895,875.00 $

7,895,875.00 $

28,825,710.00

28,561,760.75

3,210,689.00

2,791,252.40

$ 39,932,274.00 $ 39,248,888.15 $

0.00 -263,949.25 -419,436.60
-683,385.85

0.00

4,571,592.06

4,571,592.06

$ 39,932,274.00 $ 43,820,480.21 $ _ _-'3'c:.88=-=8:.,:,2=-:0c..:.6.:=.2:.c..1

EXPENDITURES
Personal Services Regular Operating Expenses Travel Motor Vehicle Purchases Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem and Fees Contracts Capital Leases

$ 18,593,069.00 $ 18,318,220.28 $

17,628,993.00

16,981,278.46

249,032.00

228,233.31

31,655.00

31,655.00

56,950.00

26,200.00

43,099.00

24,278.38

118,288.00

117,497.52

1,370,068.00

1,239,991.32

1,478,980.00

1,383,173.28

352,210.00

352,133.75

9,930.00

0.00

274,848.72 647,714.54
20,798.69 0.00
30,750.00 18,820.62
790.48 130,076.68
95,806.72 76.25
9,930.00

$ 39,932,274.00 $ 38,702,661.30 $ _ _ _1,:_2_29....:.,6_1_2_.7_0

Excess of Funds Available over Expenditures

$

5,117,818.91 $ ==,;;,.5,:,;,,1.;,;17~,8;;.;1~8,;,;;.9.;..1

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SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

DEPARTMENT OF DEFENSE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Inadequate Accumulated Depreciation Records Finding Control Number: FS-411-04-01

Condition:

The Schedule of Accumulated Depreciation (schedule), as presented for the audit, did not support the amounts provided for inclusion in the financial statements. Our examination of this schedule, which identifies beginning balance, additions, deletions, and ending balance, disclosed the following deficiencies:

1) Additions on the schedule for current year depreciation appeared to be understated.

2) Additions on the schedule for adjustments to certain prior year capital asset amounts appeared to be understated. Annual depreciation was recorded instead of total accumulated depreciation of the assets being adjusted.

Criteria:
Information: Cause:
Effect: Recommendation:

3) Building improvements were added to the capital asset account, but no associated accumulated depreciation was identified.
The State of Georgia Capital Asset Guide requires that capital assets be reported by category at historical cost or estimated historical cost when actual records are not available. Donated assets should be reported at fair value at the time of donation. Capital assets, except for land and other inexhaustible assets, should be depreciated over their estimated useful life.
A revised Schedule of Accumulated Depreciation was provided for inclusion in the financial statements after close of audit fieldwork. It appears this schedule includes recommended adjustments made to correct discrepancies noted in the schedule provided for the audit; however, the revised schedule has not been tested.
Certain building assets are not entered in the Asset Management System correctly. Since the Asset Management System calculates depreciation based on these assets, the source used to identify additions and deletions appear to have generated incorrect data. Alternatively, the agency was not maintaining a manual schedule of accumulated depreciation.
The accumulated depreciation account may be misstated. The amount of misstatement cannot be determined.
Management should develop appropriate policies and procedures to ensure that all of the Department's capital assets and accumulated depreciation are properly accounted for and reported in accordance with the State of Georgia Capital Asset Guide.

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