Management report, Department of Education, an organizational unit of the state of Georgia, year ended June 30, 1997

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MANAGEMENT REPORT DEPARTMENT OF EDUCATION AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA
YEAR ENDED JUNE 30, 1997
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASH I NGTON STREET
ATLANTA, GEORGIA 30334-8400

DEPARTMENT OF EDUCATION MANAGEMENT REPORT -TABLE OF CONTENTS-

LETTER OF TRANSMITIAL

SECTION I

SELECTED FINANCIAL INFORMATION

EXI-llBITS

A ANALYSIS OF CHANGES IN FUND BALANCE

BUDGET FUND

3

SCHEDULES OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

B

"A" DEPARTMENT OF EDUCATION

4

C

"B" LOTTERY FOR EDUCATION

6

D RECONCILIATION OF TRAVEL

7

E SUMMARY OF SALARIES, TRAVEL, AND PER DIEM AND FEES

8

SECTIONn AUDlTEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
January 5, 1998

Honorable Zell Miller, Governor Members of the General Assembly of Georgia Members of the State Board of Education
and Honorable Linda C. Schrenko, State Superintendent of Schools Department of Education
Ladies and Gentlemen:
As part of our audit of the statutory basis fmancial statements ofthe State of Georgia presented in the Report ofthe State Auditor, the general purpose 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 ofand for the year ended June 30, 1997, we have performed certain audit procedures at the Department of Education. Accordingly, the financial statements and compliance activities of the Department of Education were examined to the extent considered necessary in order to express 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 Education as of and for the year ended June 30, 1997. The particular information provided is enumerated in the Table of Contents.
This report is intended solely for the use of management of the Department of Education. However, this report is a matter of public record and its distribution is not limited.

CLV:dt

Claude L. Vickers State Auditor

SECTION I SELECTED FINANCIAL INFORMATION

DEPARTMENT OF EDUCATION ANALYSIS OF CHANGES IN FUND BALANCE
BUDGET FUND YEAR ENDED JUNE 30, 1997

EXHiBIT "A"

FUND BALANCE - JULY 1, 1996
Reserved Surplus
ADDITIONS
Adjustments to Prior Veer's Accounts Payable Grants Payable
Agency Funds Lapsed to Surplus Change in Reserve for Inventory
Donated Food Program Food Distribution Program Emergency Food Assistance Program
Excess of Funds Available over Expenditures Exhibit"B" Exhibit"C"
Prior Veer's Checks Voided Reimbursement of Prior Veer's Expenditures
Grants Other
DEDUCTIONS
Unreserved Fund Balance (Surplus) Retumed to Office ofTreasury and Fiscal Services Year Ended June 30, 1996
Adjustments to Prior Year's Accounts Receivable
Refund of Private Grent Reserved Fund Balance Carried Over from
Prior Year as Funds Available

"A" DEPARTMENT OF
EDUCATION

"B" LOTTERY FOR
EDUCATION

$

1,327,901.02

$

2,678,094.78 $

5,301,430.61

$

4,005,995.80 $

5,301,430.61 $

TOTAL
1,327,901.02 7,979,525.39
9,307,426.41

$

404,289,30 $

28,198,813,30

9,6n.69

6,160.49 $ 7,321,078.45

410,449.79 35,519,891.75
9,6n.69

-11,643.24 552,529.01

-28,782,153.14

9.05

4,701,270.38 70,726.18

$

5,143,518.53 $

542,657.26 1,523,096.12 9,392,992.32 $

-11,643.24 552,529.01
-28,782,153.14 542,657.26 9.05
6,224,366.50 70,726.18
14,536,510.85

$

2,678,094.78 $

5,301,430.61 $

7,979,525.39

0.20 381.60

0.20 381.60

416,191.91

416,191.91

$

3,094,668.49 $

5,301 ,430.61 $

8,396,099.10

FUND BALANCE - JUNE 30, 1997

$

6,054,845.84 $

9,392,992.32 $

15,447,838.16

SUMMARY OF FUND BALANCE
Reserved Federal Financial Assistance Inventories Supply Donated Food Food Distribution Program Emergency Food Assistance Program Georgia Academic and Medical System (GSAMS) Training Georgia School for the Deaf School Improvements Teacher Honorarium Payment Technology General Obligation Bond Funds Other Funds
Surplus

DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
"A" DEPARTMENT OF EDUCATION YEAR ENDED JUNE 30,1997

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)

$ 4,111,161,076,00 $ 4,110,148,575,00 $

657,450,455.00

591,175,027.17

7,182,545.00

6,630,217.09

-1,012,501.00 -66,275,427.83
-552,327.91

$ 4,775,794,076.00 $ 4,707,953,819.26 $ -67,840,256.74

0.00

416,191.91

416,191.91

$ 4,775:794,076.00 $ 4,708,370,011.17 $ -67,424,064.83

EXPENDITURES
Personal Services Regular Operating Expenses Travel Motor Vehicle Purchases Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Utilities aBE Formula Grants:
Kindergarten/Grades 1 3 Grades 4 - 8 Grades 9 - 12 High School Laboratories Vocational Education Laboratories Special Education Gifted Remedial Education Staff Development and Professional
Development Media Indirect Cost Pupil Transportation Local Fair Share Midterm Adjustment Reserve Other Categorical Grants: Equalization Formula Sparsity Grants In School Suspension Special Instructional Assistance Middle School Incentive Special Education Low Incidence Grants Limited English-Speaking Students Program

$

34,819,608.00 $

34,028,255.75 $

5,667,096.00

5,125,440.66

1,255,186.00

829,367.23

57,592.00

54,508.77

139,247.00

187,749.15

8,066,758.00

6,554,670.84

1,408,017.00

1,174,731.60

1,280,705.00

1,289,482,41

19,722,326.00

16,931,998.36

912,272,00

810,571.37

997,056,693.00 856,206,702.00 350,964,686.00 168,565,085.00 111,008,890.00 384,402,331.00
58,064,810.00 89,508,277.00

996,638,873.00 856,206,702.00 350,964,686.00 168,565,085.00 111,008,890.00 384,402,331.00
58,064,810.00 89,508,277.00

33,759,340.00 106,022,687.00 692,229,301,00 142,223,947.00 -673,903,509.00
91,618,710.00

33,759,340,00 106,022,687.00 692,229,301.00 141,591,502.00 -673,881,109,00
91,618,710.00

165,250,422.00 3,161,379.00
25,346,871.00 87,866,946.00 78,682,509.00
563,759,00 14,363,740,00

165,250,422.00 3,191,379.00
25,346,871.00 87,866,946.00 78,682,509.00
531,195.00 14,363,740.00

791,352.25 541,655.34 425,818.77
3,083.23 -48,502.15 1,512,087.16 233,285.40
-8,777.41 2,790,327.64
101,700.63
417,820.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 632,445.00 -22,400,00 0.00
0.00 -30,000,00
0.00 0.00 0.00 32,564.00 0.00

-4-

DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
"A" DEPARTMENT OF EDUCATION YEAR ENDED JUNE 30,1997

EXHIBIT"B"

EXPENDITURES
Non-QBE Grants: Education of Children of Low-Income Families Retirement (H,B. 272 and H.B. 1321) Instructional Servicas for the Handicapped Tuition for the Multi-Handicapped Severely Emotionally Disturbed School Lunch (Federal) School Lunch (State) Supervision and Assessment of Students and Beginning Teachers and Performance-Based Certification Regional Education Servica Agencies Georgia Learning Resources Systems High School Program Special Education in State Institutions Governor's Scholarships Counselors Vocational Research and Curriculum Even Start Child Care Lunch Program (Federal) Chapter II - Block Grant Flow Through Payment of Federal Funds to Board of Technical and Adult Education Education of Homeless ChildrenIYouth Innovative Programs Next Generation School Grants Drug-Free School (Federal) At Risk Summer School Program Emergency Immigrant Education Program Title II Math/Science Grant (Federal) Robert C. Byrd Scholarship (Federal) Health Insurance - Non-Cert. Personnel and Retired Teachers Pre-School Handicapped Program Mentor Teachers Advanced Placement Exams Serve America Program Youth Apprenticeship Grants Remedial Summer School Alternative Programs Environmental Science Grants Pay for Performance Mentoring Program Charter Schools Technology Specialist State and Local Education Systemic Migrant Education Nutrition Education

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 196,889,574.00 $ 188,991,040.00 $

5,438,750.00

5,419,962.28

62,216,905.00

62,209,642.00

2,210,804.00

1,851,173.57

44,566,538.00

44,566,538,00

244,375,722.00

239,017,007,49

29,128,663.00

29,268,008.00

7,898,534,00 18,787.72 7,263.00
359,630.43 0.00
5,358,714.51 -139,345.00

2,175,147,00 9,781,881.00 3,828,852.00 28,802,504.00 5,041,480.00 3,500,000.00 7,580,313.00
293,520.00 3,197,778,00 41,897,024.00 9,663,513.00
17,215,336.00 1,070,772,00 1,690,215.00
810,000.00 11,907,294,00 5,979,345,00
606,699,00 11,474,797,00
771,248.00
99,047,892.00 16,877,102,00 1,250,000.00
700,000.00 622,505,00 4,340,000,00 1,875,664.00 13,244,075.00 100,000.00 3,300,000.00 500,000.00 1,189,038.00 15,370,646.00 8,639,667,00 266,420.00
64,010.00

2,051,566.01 9,781,881.00 3,812,885.00 27,237,712.85 4,834,867.00 3,500,000.00 7,580,313.00
62,269.00 3,081,308.17 41,610,497.00 6,815,779.00
14,696,559.66 993,081,00 640,620.00 810,000.00
10,255,957.00 5,979,343,82
569,520.55 6,075,348.11
771,248.00
99,047,892.00 16,869,364.00
1,247,442.00 699,999,97 616,801.00
4,325,800.00 1,867,799.31 13,244,050.00
100,000.00 3,300,000,00
500,000.00 684,999.40 15,370,646.00 7,542,900,48 266,420.00 63,999.50

123,580.99 0.00
15,967.00 1,564,791.15
206,613.00 0.00 0.00
231,251.00 116,469,83 286,527,00 2,847,734,00
2,518,776,34 77,691.00
1,049,595,00 0.00
1,651,337.00 1.18
37,178.45 5,399,448.89
0.00
0.00 7,738.00 2,558,00
0.03 5,704.00 14,200.00 7,864.69
25.00 0.00 0.00 0.00
504,038.60 0.00
1,096,766.52 0.00 10.50

$ 4,775,794,076.00 $ 4,737,152,164.31 $ 38,641,911.69

Excess of Funds Available over Expenditures -5-

$ -28.782.153.14 $ -28.782.153.14

DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET . BUDGET FUND
"B" LOTTERY FOR EDUCATION YEAR ENDED JUNE 30,1997

EXHIBIT"C"

FUNDS AVAILABLE REVENUES
State Appropriation

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 348,481,780.00 $ 348,231,780,00 $ _ _-_2_50....:.,0_0_0_.0_0

EXPENDITURES
Capital Outlay Pre-Kindergarten for 4-year-olds Applied Technology Labs Alternative Programs Distant Learning - Satellite Dishes Post Secondary Options Computers in the Classroom Financial and Management Equipment

$ 106,708,885.00 $ 106,708,885.00 $

204,982,285,00 204,806,314.72

3,650,000.00

3,300,000,00

1,100,000.00

1,099,960.00

250,000.00

0.00

1,949,000.00

1,925,693.02

27,104,660.00

27,111,320.00

2,736,950.00

2,736,950.00

0.00 175,970.28 350,000.00
40,00 250,000.00
23,306.98 -6,660.00
0.00

$ 348,481,780.00 $ 347,689,122.74 $

7_9...:2,_65_7_.2_6

Excess of Funds Available over Expenditures

$

542,657.26 $ ===5=42;;,r,,6=5=7,;;;;.2=.6

-6-

DEPARTMENT OF EDUCATION RECONCILIATION OF TRAVEL YEAR ENDED JUNE 3D, 1997
Total per Annual Supplement
Accruals June 3D, 1996 June 30,1997 Adjustment Prior Year's Accounts Payable

EXHIBIT"D"

$

879,491.41

-4,314.73 4,696.26
109.85

$ ====8::::79=::,9=8=2,=7=9

-7-

DEPARTMENT OF EDUCATION SUMMARY OF SALARIES, TRAVEL, AND PER DIEM AND FEES
YEAR ENDED JUNE 30, 1997

EXHIBIT "E"

Totals per Annual Supplement Department of Education Office of School Readiness

SALARIES

TRAVEL

PER DIEM AND FEES

$ 24,755,477.98 $ 1,485,430.53

769,016.10 $ 1,973,447.30

110,475.31

60,403.01

$ 26,240,908.51 $ 879,491.41 $ 2,033,850.31

- 8-

SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1997

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

414-96-01 414-96-02 414-96-03 414-96-05 414-96-07

Further Action Not Warranted - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Further Action Not Warranted - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTIONIRESPONSES

COMPLIANCE WITH LAWS AND REGULATIONS Instructions to Boards of Education Not Consistent With the Official Code of Georgia Finding Control Number 414-96-01

The Department adjusted the affected boards of education local fair share for fiscal years 1993 and 1994 to resolve the finding. Code section 20-2-182 was revised in FY 95 to eliminate the limitation on transferring funds between staff development and professional development programs.

CASH AND CASH EQUIVALENTS EXPENDITURESILIABILITIESIDISBURSEMENTS Agency Funds - Deficiencies in Accounting Procedures Finding Control Number 414-96-02

The deficiencies in the management of trust fund accounts involved the Vocational Education Club Accounts, an Academy for the Blind Account, and two Georgia School for the Deaf Accounts. Information was requested from vocational education and State schools staff, so that Accounting Services personnel could determine the appropriate corrective action. A follow-up letter was sent to management level personnel outlining the corrective action needed. A meeting was also held with these individuals to go over the deficiencies.

Some of the deficiencies involving the Vocational Education Club Accounts are questionable. A number of accounts were cited for expenditures that were not within the intent of the funds. All of the expenditures were reviewed and determined to be appropriate. The club accounts have a very broad range of activities that requires many different types of expenditures.

Some of the accounts were also cited for inadequate supporting documentation for payment of services. The supporting documentation for services provided by speakers, photographers, and other individuals often consisted of a single page invoice. Most of the individuals are one person companies and have simple billing and accounting procedures. They do not use multi-page preprinted invoices. Other times, cash register receipts are the only documentation received by custodians or others purchasing items for the clubs.

- 1-

DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 1997
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
CASH AND CASH EQUNALENTS EXPENDITURESILIABILITIESIDISBURSEMENTS Agency Funds - Deficiencies in Accounting Procedures Finding Control Number 414-96-02
The finding involving checks signed by individuals other than the custodians ofthe accounts has been discussed with the Director ofthe Vocational Education section to reemphasize the requirement that only State employees may be custodians and sign checks. There were procedures in place that would have prevented the fmding, but Vocational Education personnel did not follow them.
The finding concerning sales tax is also questionable. Many of the purchases made for the club accounts involve stores that are not use to exempting purchases from sales tax, such as restaurants, discount stores, grocery stores, etc. The fact that purchases are also made by individuals paying with a check or cash, instead of by a field purchase order (FPO), causes difficulty getting the sales tax exemption. Since the custodians and other individuals purchasing items for the clubs encounter difficulty in getting the sales tax exemption, the procedures established to provide guidance in managing the trust fund accounts are being changed to no longer require sales tax be deducted from purchases. The procedures will only recommend that individuals making purchases for the clubs try to obtain exemption from sales tax when it is possible and practical.to do so, such as hotel charges, large purchases, etc.
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number 414-96-03
See our corrective action/response to fmding number 414-96-03 in the Prior Year Federal Awards Findings and Questioned Costs.
BUDGET PREPARATIONIEXECUTION Overexpenditure of Budget Unit Object Class Finding Control Number 414-96-05
The object class Non-QBE Grants - Retirement (H.B. 272 and H.B. 1321) was overspent in the amount of $135,226.18. The Teachers Retirement System annually bills the Department for retirement charges involving local school system personnel. The budget amount can only be an estimate of anticipated expenditures. Since the charges are incurred by local systems, the Department has no control over the amount or number of charges that will occur in this program.
- 2-

DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1997

PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

414-96-03 414-96-04 414-96-06

Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Further Action Not Warranted - See Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number 414-96-03

A new procedure is being adopted that requires receiving reports to go through Property Control on their way to Accounting Services for payment. Adopting this procedure by Property Control and Accounting Services should eliminate the deficiencies involving the three fmdings relating to inappropriate management practices.

The Department requires all units to conduct a physical inventory annually. The inventories are monitored by Property Control for timeliness. They are reconciled with all changes to the DOE Property System prior to the end of the current fiscal year. All units are required to notify Property Control when the items(s) they reported on their annual inventory is/are moved from its current location. The units should complete a Property Inventory Transfer Control form if the item(s) are moved to another unit along with the losing and gaining signatures ofthe respective unit supervisors. If the item is moved within the unit, the unit supervisor is required to notify Property Control either by memorandum or e-mail. The movement of equipment within the Department is the sole responsibility ofthe unit supervisors to notify Property Control to update the Property Control System to avoid audit exceptions. Failure to do so will result in equipment not being in its proper place as indicated by the DOE Property System. Property Control maintains and monitors new equipment purchases by issuing Receipt of Equipment forms, DE Form 0513, upon receipt of equipment Field Purchase Orders (FPOs) into Internal Support's Procurement Office. The Receipt of Equipment form is completed with all equipment indicated on the form that is scheduled to be purchased by the FPO. There are two conditions for the Receipt of Equipment form; the first condition is: if the equipment being purchased is being delivered directly to the unit that initiates the FPO, DOE decal number(s) will be issued and indicated on the Receipt of Equipment form by Property Control. When the equipment arrives, the unit supervisor will indicate the Serial Number and the Room Number (suite and initials of individual that is using the equipment), sign and date the Receipt of Equipment form and return to Property Control. The second condition is: if the equipment is being delivered to Internal Technology for building/loading of software, DOE decal numbers will be affixed to the equipment by Internal Technology. When the equipment arrives at the unit, the unit supervisor will

-3-

DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1997
PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding 'Control Number 414-96-03
indicate the Serial Number and the Room Number (suite and initials of individual that is using the equipment), sign and date the Receipt of Equipment form and return to Property Control. This procedure was developed by the current Agency Property Control Officer to prevent equipment from arriving into the Department without identification, however, some equipment FPOs fall through the system and eventually equipment is received without proper coding to the DOE Property System as indicated as a deficiency where two (2) items of equipment were located but were not in the equipment inventory records (DOE Property System).
SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number 414-96-04
Although the Department is responsible for tracking and reviewing the audits on local units of administration (LUAs), the Department ofAudits is required by State law to audit the LUAs, because LUAs receive the majority oftheir funding from the State. An LUA may elect to have a private CPA firm perform an audit oftheir financial records instead of the Department of Audits, with the cost of the audit being paid from local funds. In addition to the LUA audits, the Department of Audits has the responsibility to audit all State agencies, commissions, etc. The LUAs are audited after the State agencies, commissions, etc. Because the LUAs are audited last and the large number of LUAs to be audited, the Department of Audits cannot complete the audits in the thirteen-month period required by OMB Circulars A-128 and A-133. The only solution to this problem is to have the Department of Education pay private CPA firms to perform audits ofLUAs to help meet the thirteen-month time period, which would not be a cost effective solution. The U. S. Department of Education is aware of the problem, and realizes there is not currently a viable solution to the finding. The LUA audits are normally completed within a 15-18 month time period. The Department has a six-month resolution period to resolve findings in the LUA audits after being received from the Department of Audits.
CASH MANAGEMENT Failure to Amend Agreement for Change in Funding Technique Finding Control Number 414-96-06
The Department did change the funding technique for the Child and Adult Care Food Program (CACFP) from zero balance to average clearance technique. The average clearance technique was an approved funding method for other expenditures (accounts payable) in the same bank account used for the CACFP payments. The Department was using a PC-based software program from the bank
-4-

DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1997
PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTIONIRESPONSES CASH MANAGEMENT Failure to Amend Agreement for Change in Funding Technique Finding Control Number 414-96-06 to do electronic fund transfers (EFTs) to CACFP sponsors. The process requires a lot of personnel time to do the entries required for the EFTs and the accounting entries needed in FACS. Because of personnel reduction, the decision was made to stop doing EFTs and have FACS write paper checks. FACS disbursements are made using the average clearance technique. The CACFP was transferred to the Qffice of School Readiness, effective April 16, 1996. Effective with the FY 97 CACFP claims processing that began November 1, 1996, department personnel no longer has responsibility for processing CACFP claims. The Qffice of School Readiness had been advised to contact the Office of Treasury and Fiscal Services to adopt a funding technique for the account used to disburse CACFP payments.
-5-

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1997

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATIONIEXECUTION Overexpenditure of Budget Unit Object Classes Finding Control Number: FS-414-97-01

The total apprQ~ed budget for the Department of Education - "A" Budget unit and "B" Budget unit provided for expenditures totaling $4,775,794,076.00 and $348,481,780.00, respectively. A comparison ofanticipated funds available and budgeted expenditures to actual funds available and expenditures by object class indicates that the following object classes were overspent by the amounts identified below:

"A" Department of Education Equipment (In excess of 102% of budget authorized by the Appropriations Act.) Other Categorical Grants: Sparsity Grants Non-QBE Grants: School Lunch (Smte)

$ 45,717.21 $ 30,000.00 $ 139,345.00

liB" Lottery for Education Computers in the Classroom

$ 6,660.00

The overexpenditures identified above are in violation of Section 58 of the Amended Appropriations Act of 1996-1997. These overexpenditures were caused by the Department's failure to monitor the expenditure of funds against the budgeted expenditures by object class.

The Department of Education should review its internal control procedures over budget operations, design procedures which would prohibit the expenditure offunds in excess ofbudget approval, and implement those procedures to strengthen the internal controls over the budget function.

CASH AND CASH EQUIVALENTS EXPENDITURESILIABILITIESIDISBURSEMENTS Agency Funds - Deficiencies in Accounting Procedures Finding Control Number: FS-414-97-02

For the year under review, our examination included a review of the accounting procedures utilized by the Department ofEducation in mainmining their agency fund cash accounts. The following are deficiencies in accounting procedures and internal control which are in need of corrective action:

(1) Cermin disbursements were not supported by adequate documenmtion. All disbursements should be supported by adequate documenmtion to demonstrate proper disbursement and accounting of funds.

- 1-

DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 1997
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS EXPENDITURESILIABILITIESIDISBURSEMENTS Agency Funds - Deficiencies in Accounting Procedures Finding Control Number: FS-414-97-02
(2) Certain disbursements did not appear to be in compliance with the intent of the fund. Steps should be taken to ensure that records of a fund include documentation stating specific disbursements which are allowable for the fund. Custodians should ensure that disbursements are made in accordance with the documentation concerning the intent of the fund.
(3) Checks issued from the Excellence Recognition, International Exchange Program Fund, and School Improvement Workshop included checks made payable to and endorsed by the custodian ofthe account. The Department should ensure that checks are made payable to vendors and not to the custodians of individual funds.
(4) Checks issued from the Georgia School for the Deaf Accounts, Athletic Account and Miscellaneous Account were made payable to cash. Also, one check issued from the Vocational Account, Georgia Association of Future Homemakers of America was made payable to cash. This practice. is not in accordance with the Department's policy and procedures for agency funds. Measures should be taken to prevent this practice.
(5) Certain disbursements were not signed by the custodian of the account. The Vocational Education Account, Georgia Association of Vocational Industrial Clubs of America and the Georgia Association of Distributive Education Clubs of America had checks for the first half of the fiscal year which were not signed by the custodian or an authorized signer. During the fiscal year, these two agency accounts began having the proper custodian or an authorized signer sign the checks. One check was not signed by anyone in the Vocational Occupation Clubs of America account. Measures should be taken to ensure that all checks are signed by authorized SIgners.
(6) Certain disbursements included payments for sales tax. According to the Department's policy and procedures for agency funds, sales tax should not be paid on an invoice total. Custodians should ensure that sales tax is paid in accordance with Departmental policy.
Although the accounting department has sent instructions to the custodians of the agency funds, deficiencies continue to exist. The Department should continue efforts to ensure that proper accounting procedures are utilized in maintaining agency funds.
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1997
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FS-414-97-03
For the year under review, our examination included a review of the internal accounting controls utilized by the Department of Education in maintaining their State Property System and also testing the system for compliance with State laws and regulations. A number of conditions relating to inappropriate accounting practices were found to exist and have been identified in detail within the Federal Awards Findings and Questioned Costs, finding number FA-414-97-01.
The Department is required to maintain equipment inventories in accordance with provisions of the State Property Management System Manual. The discrepancies identified were caused by the Department's failure to follow guidelines for maintaining equipment inventories.
The Department should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with the State Property Management System Manual.
FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-97-01
For the year under review, our examination included a review of the internal accounting controls utilized by the Department of Education in maintaining their property management system. This review also included testing the system for compliance with Federal laws and regulations. The following conditions relating to inappropriate accounting practices were found to exist:
(1) Equipment additions were not reconciled to the general ledger expenditure accounts.
(2) Equipment inventory records for additions were up'dated incorrectly. Testing of current year additions revealed twenty-four. (24) additions that had been updated onto the equipment inventory records incorrectly by the amount of $230,525.50 (net).
(3) Equipment inventory records were deleted from the inventory system without adequate supporting documentation or proper authorization. Testing of current year deletions revealed eight (8) items that had been deleted from the inventory records incorrectly by the amount of $57,382.15. Four (4) of these eight (8) items were located during the physical inspection.
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1997
FEDERAL AWARDS FINDINGS AND OUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FA-414-97-01
(4) Equipment inventory records were deleted for Federally purchased items with a current fair market value of$5,000.00 or more without supporting documentation. Testing of current year items revealed two (2) items had been deleted from the inventory records for which the Department did not receive proper reimbursement for the Federal portion ofsale proceeds. This resulted from the Department's failure to indicate that these items were Federally funded on the Department ofAdministrative Services form for disposal of surplus property.
(5) Six (6) equipment items acquired through installment purchases were included on the equipment inventory records at an incorrect amount. The difference in the acquisition cost and the amount recorded on the inventory records amounted to $4,297.16 (net).
In addition, four-hundred-ninety (490) equipment items were selected to test the accuracy ofthe Department's property management records. These items contained a value of $1,804,354.73 out of a population of $41,550,524.57 and were selected for the purpose of locating the equipment as recorded in the inventory records. The following deficiencies were noted: .
(l) Forty-four (44) items totaling $117,683.87 could not be located.
(2) Twelve (12) items were found in locations other than the location indicated in the equipment inventory records.
Also, during the physical inspection testing, five (5) items ofequipment were located which were not included in the equipment inventory records.
The Department is required to maintain equipment inventories in accordance with provisions ofparagraph 32 of OMB's Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments (Common Rule). The discrepancies identified above were caused by the Department's failure to follow guidelines for maintaining equipment inventories.
The Department should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with provisions of OMB's Common Rule.
Major Federal Programs/Awards Affected:
U. S. Department of Education Special Education - Grants to States - CFDA No. 84-027 Vocational Education - Basic Grants to States - CFDA No. 84.048
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIQNED COSTS
YEAR ENDED JUNE 30, 1997
FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-97-01
Federal Agencies With Other Affected Programs:
U. S. Department of Agriculture U. S. Department of Education
SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-97-02
As part of our examination for the year under review, we examined tracking documents used by the Department of Education to determine the status of subrecipient audit reports for the year ended June 30, 1996. Of the 445 subrecipients identified on the tracking documents, 220 had not submitted their audits within the thirteen month period as required by OMB Circulars A-l28 and A-l33. This noncompliance is due to subrecipient audits not being performed in a timely manner.
A subsequent review of the status of the 220 audits not submitted by the due date, indicated that 160 of the reports had been submitted by December 23, 1997. Qfthe 60 remaining audits not submitted, 59 of those audits are the responsibility of the Office of School Readiness which is administratively attached to the Department of Education. It was noted during our examination that the Department of Education utilized a program review staff for interim compliance reviews of all subrecipients in accordance with the foregoing provisions ofQMB Circulars A-128 and A-l33.
Major Federal Programs/Awards Affected:
u. S. Department of Agriculture
Food Distribution - CFDA No. 10.550 School Breakfast Program - CFDA No. 10.553 National School Lunch Program - CFDANo. 10.555 Child and Adult Care Food Program - CFDA No. 10.558 U. S. Department of Education Title I Grants to Local Educational Agencies CFDA No. 84.010 Special Education - Grants to States - CFDA No. 84.027 Vocational Education - Basic Grants to States - CFDA No. 84.048
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1997 FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS - SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-97-02 Federal Agencies With Other Affected Programs: U. S. Department of Agriculture Corporation for National and Community Service U. S. Department ofEducation U. S. Department ofHealth and Human Services
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