bk Argia 3()334-84()() July 18, 2001 Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Screven County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of Screven County Board of Education as of and for the year ended June 30, 2000, and have issued our report thereon dated July 18, 2001. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Compliance As part of obtaining reasonable assurance about whether Screven County Board of Education's financial statements are free of material misstate:r11ent, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the dete11nination offinancial state:rnent amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and perfor1ning our audit, we considered Screven County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2000YB-40A control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Screven County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7241-00-01 and FS-7241-00-02. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the no1mal course of performing their assigned functions. Our consideration ofthe internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions, and accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, all of the reportable conditions noted above are also considered to be material weaknesses. This report is intended solely for the info1n1ation and use ofmanagement, members ofthe Screven County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, tJ. R ssell W. Hinton State Auditor RWH:jb 2000YB-40A RussELI, \V. HINTON STATE AUDITOR 1404I 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Wasl1i11gtc111 Street. S.W.. Suite 214 Atlanta. Getirgia 3()334-84()() July 18, 2001 Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Screven County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Screven County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2000. Screven County Board ofEducation's major Federal programs are identified in the accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility ofScreven County Board ofEducation's manageinent. Our responsibility is to express an opinion on Screven County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular Al 33, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perfu1m the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance 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 Screven County Board of Education's compliance with those requirements and perfu1ming such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal dett:1111ination on Screven County Board ofEducation's compliance with those requirements. 2000SA-10A In our opinion, the Screven County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2000. Internal Control Over Compliance The management of Screven County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Screven County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to deterrnine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the no1n1al course ofperfo1n1ing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the info11nation and use ofmanagement, members ofthe Screven County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:jb 2000SA-10A .,..,.,., ( ~ R sell W. Hinton State Auditor SECTION ill AUDfl'EE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SCREVEN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2000 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS . FS-7241-98-01 FS-7241-98-02 FS-7241-99-01 FS-7241-99-02 FS-7241-99-03 Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUNALENTS . Inadequate Separation of Duties Finding Control Number: FS-7241-99-01 We concur with the finding and realize the importance of separation of duties as an internal control mechanism. Due to current budgetary constraints, the Board is unable to hire additional staff. Steps will be taken, however, to review the accounting procedures in place, and ifpossible, design procedures to enhance segregation of duties relative to the control categories outlined in finding FS-7241-99-01. GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-7241-99-02 We concur with the recommendation. However, due to current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staff and to the lack of technical support from the State Department of Education, the Board has decided not to pursue the recording ofgeneral fixed assets on the financial statements at the present time. EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Meet Expenditure Requirements Amount: $7,559.14 Finding Control Number: FS-7241-99-03 The underexpenditure ofQuality Basic Education (QBE) funds for the StaffDevelopment Programs will be returned to the Georgia Department of Education. SECTIONN FINDINGS AND QUESTIONED COSTS SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2000 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Screven County Board ofEducation's financial statements was qualified for various departures from generally accepted accounting principles. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Screven County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents General Fixed Assets All of the reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Screven County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Screven County Board ofEducation did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Screven County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Screven County Board ofEducation's audit did not disclose audit findings req11ired to be reported by section .510(a) ofOMB Circular A-133. 7. Maior Programs C Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program- Food Services - National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I- Grants to Local Educational Agencies 8. Type ''A'' Program Dollar Threshold The dollar threshold for type ''A'' programs was $300,000.00. 9. Low Risk Auditee The Screven County Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133. - 1- SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2000 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS Inadequate Separation of Duties Reportable Condition - Material Weakness Repeat From Prior Year Finding Control Number: FS-7241-00-01 An examination ofthe internal accounting control procedures revealed that the Board did not provide for adequate separation of duties in the performance of the following accounting functions and related procedures: The bank reconciliation function was not separated from check preparation or bookkeeping function and bank reconciliations were not reviewed by an individual independent of the bank reconciliation process. The check preparation function was not separated from check signing and check distribution functions. Blank checks were not stored under the control ofsomeone outside the check writing/preparation function. . The bookkeeping function was not separated from the check writing or cash receipts functions and signed checks were not mailed by an employee other than those having access to cash and cash records. These conditions were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions. The Board should review the accounting procedures in place, design procedures which would enhance segregation of duties relative to the above control categories and implement those procedures to strengthen the internal control over accounting functions. GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeat From Prior Year Finding Control Number: FS-7241-00-02 The Screven County Board of Education did not maintain a system-wide General Fixed Assets Account Group within the fo1111al accounting records as required by generally accepted accounting principles. This condition results in the general purpose financial statements of the Board being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the Board to establish accounting controls and procedures to provide for -2- SCREVEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2000 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeat From Prior Year Finding Control Number: FS-7241-00-02 maintenance of a General Fixed Assets Account Group. These subsidiary records should include an inventory ofland, buildings and equipment owned by the Board and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Assets Account Group. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3-