Management report, Department of Education, an organizational unit of the state of Georgia, year ended June 30, 1999

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MANAGEMENT REPORT

DEPARTMENT OF EDUCATION

! AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA

I

YEAR ENDED JUNE 30,1999

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STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

DEPARTMENT OF EDUCATION
MANAGEMENT REPORT .
- TABLE OF CONTENTS -

LETTER OF TRANSMITTAL

SECTION I

SELECTED FINANCIAL INFORMATION

EXHIBITS

A ANALYSIS OF CHANGES IN FUND BALANCE

BUDGET FUND

1

SCHEDULES OF FUNDS AVAILABLE AND EXPENDITIJRES

COMPARED TO BUDGET

BUDGET FUND

B " A " DEPARTMENT OF EDUCATION

2

C

"B" LOTTERY FOR EDUCATION

4

D RECONCILIATION OF IRAVEL

5

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

6

SECTIONll AUDITEE'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

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
January 20, 2000

Honorable Roy E. Barnes, Governor Members ofthe General Assembly of Georgia .Members ofthe State Board ofEducation
and Honorable Linda C. Schrenko, State Superintendent of Schools Department ofEducation
Ladies and Gentlemen:
As part ofour audit of the statutory basis financial statements ofthe State of Georgia presented in the State of Georgia Report ofthe 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 ofEducation. Accordingly, the financial statements and compliance activities ofthe Department ofEducation 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 Education 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 ofmanagement ofthe Department ofEducation and members ofthe Board and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
J.~
ussell W. Hinton State Auditor
RWH:jb

SECTION I SELECTED FINANCIAL INFORMATION

DEPARTMENT OF EDUCATION 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 Grants Payable Excess of Funds Available over Expenditures Exhibit"B" Exhibit "CO Prior Year's Checks Voided Reimbursement of Prior Year's Expenditures Grants Other
DEDUCTIONS
Unreserved Fund Balance (Surplus)
Retumed to Office of Treasury and
Fiscal Services Year Ended June 30.1998
Adjustments to Prior Year's Accounts Receivable
Deciease in Reserve for InventOry Donated Food Program Food Distribution Program Emergency Food Assistance Program
Refund of Technology General Obligation Bond Funds Reserved Fund Balance carried Over from
Prior Year as Funds Available

"A" DEPARTMENT OF
EDUCATION

"B" LOTTERY FOR
EDUCATION

$ 5.n9,301.40

$

2,512.174.49 $ 2.272,9n.98

$ 8.291.475.89 $ 2.272,9n.98 $

TOTAL
5,779,301.40 4,785,152.47
10.564.453.87

$ 1.738,528.05 37,088.662.31 $
-34,113.337,26
8,467.52
9.887.500.17 117.212.16
$ 14,727,032.95 $

$ 1,738,528.05

1,783,410.61

38.872.072,92

1,990.747.48

-34,113,337,26 1,990.747.48 8,467,52

1.167,105.68

11.054,605.85 117.212,16

4.941,263.n $ 19,668,296.72

$ 2,512.174.49 $ 2.272.977.98 $ 4,785,152.47

31.987,58

31.987,58

98.522,24 15,205.47 5,464,78

98,522.24 15,205.47 5,464,78

3.530.998,50

3,530,998,50

$ 6.194.353,06 $ 2:J,72.9n.98 $ 8,467.331.04

FUND BALANCE - JUNE 30, 1999

$ 16,824,155.78 $ 4,941.263.n $ 21.765.419.55

SUMMARY OF FUND BALANCE
Reserved Federal Financial Assistance Inventories Supply Donated Food Food Distribution Program Emergency Food Assistance Program Year 2000 Project Georgia Academic and Medical System (GSAMS) Training Georgia School for the Deaf School Improvements Teacher Honorarium Payment Other Funds
SurplUS

DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
W DEPARTMENT OF EDUCATION 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)

$ 4,830,191,716.00 $ 4,827,691,716.00 $

854,645,472.00

717,742,445,10

13,492,380.00

6,385,480,45

-2,500,000.00 -136,903,026.90
-7,106,899.55

$ 5,698,329,568.00 $ 5,551,819,641,55 $ -146,509,926.45

0.00

3,530,998.50

3,530,998.50

$ 5,698,329,568.00 $ 5,555,350,640.05 $ -142,978,927.95

EXPENDITURES
Personal Services Regular Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Utilities QBE 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 Mid-Term Adjustment Reserve Other Categorical Grants: Equalization Formula Sparsity Grants In School Suspension Special Instructional Assistance Middle School Incentive Special Education Low - Incidence Grants Umited English-Speaking Students Program Non-QBE Grants: Education of Children of Low-Income Families Retirement (H.B. 272 and H.B. 1321) Instructional Services for the Handicapped Tuition for the Multi-Handicapped Severely Emotionally Disturbed

$ 37,772,100.00 $ 8,828,796.00 1,561,170.00 290,997.00 15,029,387.00 1,369,040.00 1,660,814.00
61,421,885.00 801,952.00

36,544,473.14 $ 6,260,709.08 863,838,66 148,054.03 13,049,645.07 1,064,097.63 1,459,110.80
50,743,747.71 692,017.77

1,173,807,251.00 987,563,508.00 409,873,516.00 199,559,054.00 139,745,943.00 . 496,076,920.00 87,871,287.00 107,861,639.00

1,173,807,251.00 987,563,508,00 409,873,516.00 199,559,054.00 139,745,943.00 496,076,920.00 87,871,287.00 107,861,639.00

35,249,634.00 126,527,505.00 769,485,474.00 151,357,028.00 -806,475,905.00
84,059,279.00

35,249,634.00 126,527,505.00 769,411,035.00 151,356,808.00 -806,475,905.00
84,017,279.00

204,284,966.00 3,069,628.00
30,259,339.00 103,570,578.00
93,769,928,00 620,134.00
22,435,459.00

204,284,965.00 3,069,628.00
30,259,339.00 103,570,578.00 93,823,968.00
620,134.00 22,475,459.00

236,313,587.00 6,126,750.00
107,383,857.00 2,300,000.00
51,239,512.00

224,185,363.64 6,085,665.93
107,121,938.00 1,230,380.23
51,071,957.00

1,227,626.86 2,568,086.92
697,331.34 142,942.97 1,979,741.93 304,942.37 201,703.20 10,678,137.29 109,934.23
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 74,439.00 220.00 0.00 42,000.00
1.00 0.00 0.00 0.00 -54,040.00 0.00 -40,000.00
12,128,223.36 41,084.07
261,919.00 1,069,619.77
167,555.00

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DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
"A" DEPARTMENT OF EDUCATION YEAR ENDED JUNE 30, 1999

EXHIBIT"B"

EXPENDITURES
Non-QBE Grants: School Lunch (Federal) School Lunch (State) State and Local Education Improvement Supervision and Assessment of Students and Beginning Teachers and PerformanC&'Based Certification Regional Education Service Agencies Georgia Learning Resources System High School Program Special Education in State Institutions Governor's Scholarships Counselors Vocational Research and Curriculum Even Start PSAT Student Record Year 2000 Project Funding Child care Lunch Program (Federal) Chapter" - Block Grant Flow Through Payment of Federal Funds to Board of Technical and Adult Education Education of Homeless ChiidrenIYouth Innovative Programs Next Generation School Grants Drug-Free School (Federal) At Risk Summer School Program Emergency Immigrant Education Program TiDe" 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 Joint Evening Programs Environmental Science Grants Pay for Performance Mentoring Program Charter Schools Technology Specialist Migrant Education Troops to Teachers Nutrition Education Comprehensive School OSR - Standards of care
Excess of Funds Available over Expenditures

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 263,375,722.00 $ 33,469,043.00 27,768,927,00

252,348,534,23 $ 32,855,173,00 21,612,028,09

11,027,187,77 613,870.00
6,156,898,91

1,491,147.00 10,496,210.00 4,122,865.00 41,501,450.00 3,884,639,00 3,603,824.00 12,446,186.00
293,520.00 3,324,654.00
756,500,00 981,050.00 11,949,362.00 89,190,742.00 10,355,868.00
17,650,639.00 931,996.00
1,690,215.00 511,000,00
14,335,141.00 4,632,785.00 2,023,105.00 12,680,360.00 1,047,000.00
99,547,892.00 18,613,363.00
1,250,000.00 1,695,052.00
601,957.00 4,340,000.00 1,689,931.00 12,976,614.00
267,333.00 100,000,00 7,618,000.00 500,000.00 2,164,604.00 15,401,836.00 274,395,00
84,840.00 92,275.00 3,785,514.00 140,000.00

1,491,147.00 10,496,205.00 3,934,732.00 30,720,346.91 3,689,755,00 3,603,824.00 12,446,182.00
176,116,79 3,178,451.00
590,619.25 808,179.25 11,045,028.70 56,475,415.12 8,702,431.00
14,306,663.10 843,186.00 482,900.00 665,000.00
13,005,911.00 4,632,784.95 2,023,105.00 7,731,316.51 1,047,000.00
99,547,892.00 18,610,734.00
1,248,210.00 1,608,244.00
570,412.00 4,304,416.00 1,680,519.36 12,976,613.36
267,333.00 100,000,00 7,620,000,00 492,284.00 1,794,900.00 15,401,810,00 274,395.00
84,840.00 57,750.00 2,735,546.00 105,500.00

0.00 5.00 188,133.00 10,781,103,09 194,884,00 0.00 4.00 117,403.21 146,203.00 165,880,7.5 172,870,75 904,333.30 32,715,326.88 1,653,437.00
3,343,975,90 88,810,00
1,207,315.00 -154,000,00 1,329,230.00
0.05 0.00 4,949,043,49 0.00
0.00 2,629.00 1,790.00 86,808.00 31,545.00 35,584.00 9,411.64
0.64 0.00 0,00 -2,000.00 7,716.00 369,704.00 26.00 0.00 0,00 34,525.00 1,049,968.00 34,500,00

$ 5,698,329.568,00 $ 5,589,463,9n.31 $ 108,865,590,69

-3-

#"
$ -34,113,337,26 $
:bf..;;ll1le.'

-34,113,337,26

DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
"B" LOTTERY FOR EDUCATION
YEAR ENDED JUNE 30,1999

EXHIBIT"C"

FUNDS AVAILABLE REVENUES
State Appropriation

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 324,585,972.00 $ 323,135,972.00 $ -"1,450,000.00

EXPENDITURES
Capital Outlay Pre-Kindergarten - Grants Pre-Kindergarten - Personal Service Pre-Kindergarten - Operations Applied Technology Labs Financial and Management Equipment Educational Technology Centers Fort Discovery National Science Center Post Secondary Options Assistive Technology Computers in the Classroom

$ 60,938,547,00 $ 209,288,979.00 1,992,303.00 5,047,677,00 3,300,000,00 9,006,730.00 660,000.00 1,500,000,00 4,064,736,00 2,000,000,00 26,787,000.00

60,938,547.00 $ 208,699,459.58
1,876,640.36 4,752,205.93 1,850,000,00 8,984,989,16
659,999.79 1,500,000.00 3,102,890.70 2,000,000.00 26,780,492.00

0.00 589,519.42 115,662.64 295,471.07 1,450,000.00
21,740.84 0.21 0,00
961,845,30 0.00
6,508.00

$ 324,585,972,00 $ 321,145,224.52 $ _--=3:.!..,44~O,.:...74.:.:.7..:..:.4.::.8

Excess of Funds Available over Expenditures

$ 1,990,747,48 $ =======1l:::!:,9=:9:::!0,=74=7=.4=8

-4-

DEPARTMENT OF EDUCATION RECONCILIATION OF TRAVEL YEAR ENDED JUNE 30,1999
Total per Annual Supplement
Accruals June 30, 1998 June 30, 1999
Adjustment to Prior Year Accounts Payable

EXHIBIT"D"
$ 978,534.04
-692.30 2,388.46
15.00
$ 980,245.20

-5-

DEPARTMENT OF EDUCATION SUMMARY OF SALARIES, TRAVEL, AND PER DIEM AND FEES
YEAR ENDED JUNE 30,1999

EXHIBIT"E"

Totals per Annual Supplement Department of Education Office of School Readiness

SALARIES

TRAVEL

PER DIEM AND FEES

$ 25,833,158.60 $ 767,123.29 $ 1,485,468.13

2,772,140.72

211,410.75

112,845.85

$ 28,605,299.32 $ 978,534.04 $ 1,598,313.98

-6-

SECTIONll 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. 1999

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-414-97-02 FS-414-97-03 FS-414-98-01
FS-414-98-02
FS-414-98-03 FS-414-98-04

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

CORRECTIVE ACTIONIRESPONSES

BUDGET PREPARATION/EXECUTION Overexpenditure ofBudget Unit Object Classes Finding Control Number: FS-414-98-01

We concur with this :finding. The conditions relating to inappropriate accounting practices have been reviewed and corrective action has been takep. to resolve the "inappropriate" practices.

Computer Charges - $4,187,641.64. In 1997; the Department-ofEducation began an initiative to replace the current fund accounting system with a revised software package, selected through a comp.etitive bid process in accordance with state purchasing laws. At some point after selecting this package, the project manager for the initiative (staffmember in the technology services division) began authorizing a second vendor to provide services to implement and customize the package. This second vendor was on contract with the Department ofEducation and also selected through a competitive bid process in accordance with state purchasing laws. However, the services authorized exceeded the amount budgeted and approved in relation to this vendor. In addition, it was discovered that the invoices from the vendor were being held by this staff member, presumably to conceal the excesses. This staff member is no longer employed by the Department ofEducation. In addition, procedures have been put in place to safeguard against this type ofoccurrence in the future. Technology Services has implemented a requirement in which contractors (those paid on an hourly basis) must submit in advance their estimated hours and project tasks for the following week. The management of Technology Services is required to sign offon all estimated costs to be incurred, and give :final approval to all invoices submitted. In addition, the management in this office has taken a proactive role in the technology initiatives, and stays apprised ofthe status and progress of each project through updates from the program managers and contractor personnel. As a last safeguard, the accounting/budget division has put in place a policy in which the total expenditures per contractor are compared with the total amount authorized.

- 1-

DEPARTMENT OFEDUCATIQN AUDIIEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
BUDGET PREPARATION/EXECUTION Overexpenditure ofBudget Unit Object Classes Finding Control Number: FS-414~98-01
Telecommunications - $28,641.78. The overexpenditure of$28,641.78 was due to a higher than anticipated usage for telecommunications by the Technology Support Unit. The higher usage was mainly due to telecommunication needs to support local school systems. With the new computer applications developed in fiscal year 98 involving the department and local systems, it is extremely difficult to anticipate the amount needed for telecommunications.
Indirect Costs - $1,065.00. Charges for Nationally Certified Teachers were charged to this account because we had no line item from which to pay them. We were able to cover the earlier charges for this program in the supplemental appropriation. We tried to cover the rest in Fiscal Affairs, but OPB did not let this request go through.
Retirement (lIB 272 and lIB 1321) - $258,733.06. We receive monthly bills from the Retirement System for lunch room, school bus and other unit managers who have elected to join the teacher retirement system. The amounts vary each month and the last bill was simply more than was anticipated.
Regional Education Services Agencies - $631.00. This grant was under funded in the supplemental appropriation. We attempted to correct this in Fiscal Affairs, but OPB denied the request.
Joint Evening Program - $300.00. Funds were added to the incorrect line item in supplemental. We attempted to correct this in Fiscal Affairs, but OPB denied the request.
CASH AND CASH EQUIVALENTS EXPENDITURESILIABILITIESfDISBURSEMENTS Agency Funds - Deficiencies in Accounting Procedures Finding Control Number: FS-414-98-02
We concur with this finding. To correct the deficiencies cited in the fiscal year 98 audit concerning agency fund accounts, the following corrective action has been taken:
-2-

DEPARIMENT OF EDUCATION
AuPITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
CASH AND CASH EQUIVALENTS EXPENDITURESILIABILITIESIDISBURSEMENTS Agency Funds - Deficiencies in Accounting Procedures Finding Control Number: FS-414-98-02
The Georgia School for the Deafhas changed accounting personnel to help eliminate problems found by department personnel and state auditors. The problems have been discussed with the new business manager and periodic reviews of the state schools are now done by personnel in the department's financial review unit. The reviews are to look at the trust accounts to ensure that proper documentation is being kept to support expenditures; the expenditures are within the scope of the. fund; and to ensure compliance with trust fund procedures.
The trust account in the Professional Practices Commission has been transferred to the Professional Standards Commission. The Professional Practices Commission was merged with the Professional Standards Commission by Governor's Executive Order in fiscal year 98. The trust account is now part ofthe Office ofPlanning and Budgets' accounting records.
The Georgia FEA Association account has also been transferred, along with all the other vocational education accounts. The Department does not now have responsibility for any ofthe vocational education club accounts. The accounts have been transferred to statewide vocational education organizations that oversee the activities ofthe clubs at the local level.
The trust fund accounting procedures have been revised to eliminate the requirement of custodians to obtain exemption from sales tax when expending funds. It was never the intent of the procedures to require the payment of sales tax on all purchases. Many purchases are made by paying cash or agency fund check and not by a departmental check and purchases are made at businesses that do not nonnally provide sales tax exemptions. It is impossible for individuals to always get the exemption on sales tax, so the procedures were revised to make it clear that exemption from sales tax is not a requirement.
EXPENDITURESILIABlllTIESIDISBURSEMENTS Failure to Comply With the Fair and Open Grants Act Finding Control Number: FS-414-98-03
We concur with the recommendation ofsubmitting the required infonnation by the December 31st deadline. The previously reported action included a failure to submit a description of grant programs with the Secretary ofState as required by the Official Code ofGeorgia Annotated Section 28-5-122. The complete list has been submitted to the Secretary of State. The Official Code of
-3-

DEPARTMENT OF EDUCATION
AlIDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Comply With the Fair and Open Grants Act Finding Control Number: FS-414-98-03

Georgia Annotated Section 28-5-124 refers to the deadline of submitting the information by December 31 st following the State fiscal year end. We are in the process of submitting this information by December 23, 1999, to avoid this finding for the next fiscal year end.

GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management SYstem Finding Control Number: FS-414-98-04

See our corrective action/responses to finding number FA-414-98-01 in the Prior Year Federal Awards Findings and Questioned Costs.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-414~97-01
FA-414-97-02 FA-414-98-01 FA-414-98-02

Further Action Not Warranted Further Action Not Warranted Partially Resolved - See Corrective ActionlResponses Partially Resolved .,. See Corrective ActionlResponses

CORRECTIVE ACTIONIRESPONSES

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FA-414-98-01

We concur with this recommendation. The Department continues to have problems with the Property Management System. Steps are taken each year to resolve the finding, with only partial success. Property management practices are being reviewed to seek further ways to resolve the problems. The following is the fiscal year 98 audit finding in Equipment and Real Property Management for this department.

-4-

DEPARIMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARy SCHEDULE OF PRI6R YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Qperatiop. of Property Management System Finding Control Number: FA-414-98-01
1. This primarily resulted in equipment paid in Accounting Services and the DE form 0513, Receipt of Equipment form, not received from initiating units until after June 30, 1998, along with changes on invoices after the receiving report was received in. Accounting Services. Also, units failure to follow throllgh with changes on invoices associated with field purchase order to Property Control.
2. Resulted in changes on invoices after the receiving report was received in Accounting Services.
3. Property Control has always taken the fiscal year physical inventory as proper documentation, signed by the unit head, as being correct as ofthat date. The DE form 0082 is always completed on equipment that is stolen or damaged, but the term "lost" on the form was misconstrued by the Agency Property Officer as meaning more thanjust missing. This thinking has been reversed and now, fiscal year 1999 physical inventories received with equipment missing, will have a completed DE form 0082 to support this status by the unit head.
4. Resulted in changes on invoices after the receiving report was received in Accounting Services.
The guidelines for maintaining equipment inventories have been again reviewed with department personnel.
1. Failure by unit to properly account for their inventory whether the item is being moved by an employee ofthe unit or by Technology Services.
2. A surplus form completed by an agency when equipment is surplused has to be kept on file until the signed surplus form is received from DOAS-State Surplus Property. An item indicated as "stolen" must remain on an agency's inventory for a minimum of2 years as with an item "missing".
3. A unit which fails to properly inventory equipment or inventories completed in a hurry will result in equipment being indicated as "missing". This is a result of poor inventory inspection techniques by the unit.
-5-

DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FA-414-98-01 4. Equipment not controlled properly will result in surprise findings of equipment. The four items located were reconstructed in Property Control as they had been identified on a DOAS Surplus form as being surplused at a prior date. SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-98-02 We concur with this recommendation. Although the Department ofEducation is responsible for tracking and reviewing the audits oflocal units ofadministration (LUAs), the Department ofAudits is required by state law to audit the LUAs, because LUAs receive the majority oftheir funding from the state. In addition to the LUA audits, the Department ofAudits 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 ofAudits cannot complete the audits in the time period required by OMB Circular A133. The U. S. Department ofEducation is aware ofthe 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 ofAudits. The Department ofAudits has proposed an alternative approach for providing Federal audit coverage of local school systems that should eliminate receiving state audits after the required time period.
-6-

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

DEPARTMENT OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONEP COSTS YEAR ENDED ruNE 30, 1999

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION Overexpenditure ofBudget Unit Object Classes . Finding Control Number: FS-414-99-01

The total approved budget for the Department of Education - "A" Budget unit provided for expenditures totaling $5,698,329,568,00, 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 Other Categorical Grants: Middle School Incentive Limited English-Speaking Students Program Non-QBE Grants: Next Generation School Grants Pay for Performance

$ 54,040,00 $ 40,000,00
$ 154,000,00 $ 2,000,00

The overexpenditures identified above are in violation of Section 57 ofthe Amended Appropriations Act of
1998-1999, These overexpenditures were caused by the Department's failure to monitor the expenditure of funds against the budgeted expenditures by object class.

The Department ofEducation 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.

EXPENDlTURESILIABILITIESIDISBURSEMENTS Failure to Comply With the Fair and Open Grants Act Finding Control Number: FS-414-99-02

As part ofour examination, we reviewed the Office ofSchool Readiness' compliance with the "Fair and Open Grants Act of 1993". The following instances ofnoncompliance were found:

1. The Office failed to submit a description of grant programs with the Secretary of State prior to granting funds as required by the Official Code of Georgia Annotated Section 28-5-122. OCGA 28-5-122 states, in part, as follows:

"Before any state agency may make any grant ofpublic funds or of funds otherwise within its power of disposition, the state agency must publish a description ofthe grant program in the Official Compilation of the Rules and Regulations ofthe State of Georgia..."

The Office did send a description ofthe grant programs to the Secretary ofState, but it was not sent prior to granting any ofthe funds.

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DEPARIMENT OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Comply With the Fair and Open Grants Act Finding Control Number: FS-414-99-02
2. The Office failed to compile and file with the Secretary of State a list of grants awarded and disbursed in fiscal year 1998 as required by the Official Code of Georgia Annotated Section 28-5124. OCGA 28-5-124 states, in part, as follows:
"Before December 31 of each calendar year, each state agency shall compile and file with the Secretary of State a list ofgrants awarded and disbursed in the prior fiscal year, ..."
These instances of noncompliance occurred because the Office of School Readiness failed to submit information to the Secretary of State as required by the Official Code of Georgia. The Office should take appropriate action to ensure that the Office complies with the "Fair and Open Grants Act of 1993".
EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Monitor QBE Program Expenditure Requirements in School Systems with Charter Schools Finding Control Number: FS-414-99-03
The Official Code of Georgia Annotated Section 20-2-167 (a) requires the State Board of Education to annually adjust a School System's local fair share amount in the event the School System does not meet the program expenditure requirements stipulated in the law. In order to perform this function, the State Board must annually determine each School System's expenditure requirements and monitor actual expenditures for compliance.
Subsequent to passage ofthe aforementioned law, the GeneralAssembly enacted legislation, which exempts a charter school from the expenditure requirements as discussed above. As a result of this legislation, the State Board must now exclude any duly created charter school from the computations in determining a School System's expenditures requirements for purposes ofdetermining compliance with Code Section 20-2-167 (a).
In fiscal year 1999, nine (9) School Systems had charter schools operating within theirjurisdiction. However, the State Board did not exclude these charter schools in determining expenditure requirements for the affected School Systems for the purpose ofdetermining expenditure requirements for the non-charter schools in the district. Consequently, because the State Board did not provide a basis for complying with Section 20-2-167 (a), it is not possible for the State Board to monitor affected School Systems actual expenditures for purposes of annually adjusting that School System's local fair share.
The State Board of Education should establish procedures to ensure that it is able to accurately calculate program expenditure requirements on an annual basis for all School Systems which have Charter Schools operating in their jurisdiction.
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PEPARIMENT OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1999
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation ofPropertyManagement System Finding Control Number: FS-414-99-04
Our examination included a review of the internal accounting controls utilized by the Department of Education and the Office ofSchool Readiness in maintaining their State Property System and also included 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 control number FA-414-99-01.
The Department and the Office are required to maintain equipment inventories in accordance with provisions of the State PrWerty Management System Manual as published by the Department of Administrative Services. The discrepancies identified were caused by the Department's and the Office's failure to follow guidelines for maintaining equipment inventories.
The Department and the Office should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with the State Pmperty Management System Manual.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FA-414-99-01
Our examination included a review of the internal accounting controls utilized by the Department of Education and the Office of School Readiness in maintaining their property management system and 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. The Department is required by State property management policies to reconcile current year additions as reflected in the equipment inventory records to the general ledger equipment expenditure accounts. Although this reconciliation was performed, an unexplained difference of $723,012.59 remained at June 30, 1999.
2. Twelve (12) additions for current year equipment purchases were updated incorrectly onto the equipment inventory records by an amount of$89,319.64 (net). Five (5) ofthose items, in the net amount of$I,074.46, were related to the Department ofEducation. The remaining seven (7) items, in the net amount of$88,245.18, were related to the Office of School Readiness.
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DEPARTMENT OF EDUCATION
SCHEDULE OF FINDINGS AND QIJESTIONED COSTS YEAR ENDEn ruNE 30. 1999

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FA-414-99-01

3. Testing of current year deletions of the Office of School Readiness revealed five (5) items in the amount of $23,410.00 had been deleted from the inventory records without supporting documentation or proper authorization.

4. Four (4) 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 $1,678.92 (net). These same equipment items were identified in qur prior year Management Report as b~ing recorded incorrectly.

In addition, five-hundred-ten (510) equipment items were selected from certain locations to test the accuracy of the Department's property management records. These items contained a value of$I,457,963.30 out of a population of $9,053,011.08 at the tested locations and were selected for the purpose of locating the equipment as recorded in the inventory records. The general fixed assets of the Department amounted to $46~213,480.84. The following deficiencies were noted:

1. Eleven (11) items totaling $35,490.00 could not be located.

2. Thirteen (13) items were found in locations other than the location indicated in the equipment inventory records.

3. Four (4) items were found that were recorded as missing on the inventory records.

4. Ten (10) items were recorded on the inventory records as either missing, intransit or damaged, but there was no supporting documentation on file to support that classification.

5. Three (3) items were located by the description on the inventory records but no decal numbers were found on the equipment.

6. One item was recorded on the inventory records with an incorrect description on the equipment.

Also, during the physical inspection testing, twenty (20) items of equipment were located which were not

included in the equipment inventory records.

'

The Department and Office are required to maintain equipment inventories in accordance with provisions of paragraph 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 and the Office's failure to follow guidelines for maintaining equipmentmventories.

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DEPARTMENT OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 3Q, 1999

. FEPERAL AWARD FINDINGS AND QlJESTIONED COSTS

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FA-414-99-01

The Department and Office should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with provisions of OMB's Common Rule.

Milior Federal Programs/Awards Affected:

U. S. Department of Education Title I Grants to Local Educational Agencies - CFDA No. 84.010 Special Education Cluster Special Education - Grants to States- CFDA NO. 84.027 Special Education - Preschool Grants - CFDA No. 84.173 Vocational Education - Basic Grants to States - CFDA No. 84.048
Federal Agencies With Other Affected Programs:

U. S. Department of Agriculture U. S. Department ofEducation

REPORTING Financial Status Report Not Reconciled to Accounting Records Finding Control Number: FA-414-99-02

Our examination included a review ofthe Financial Status Report (SF-269) submitted by the Department of Education to the U. S. Department ofEducation. Amounts reported on the Financial Status Report for both the 1997 and 1998 award year did not agree with the accounting records as indicated below:

Financial Status &port Item

Per Re.port

Accounting Records

Difference

1997 Award V243A60081 Tech-Prep Education

$2,914,531.00 $2,923,445.40 $ 8,914.40

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DEPARIMENT OF EDUCATION
SCHEDULE OF FINDINGS AND Q1JESTIQNED COSTS YEAR ENDED JUNE 30, 1999

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

REPORTING Financial Status Report Not Reconciled to Accounting Records Finding Control Number: FA-414-99-02

Financial Status Re.port Item

Per Re.port

Accounting Records

Difference

1998 Award V048A70010 Local Grants State Administration Single Parent and Homemaking State Leadership V243A70081 Tech-Prep Education

$9,891,987.00 $9,894,467.71 $ 2,480.71 $ 587,741.00 $ 590,586.44 $ 2,845.44 $ 503,198.00 $ 507,445.67 $ 4,247.67 $ 774,342.00 $ 778,129.50 $ 3,787.50
$ 906,422.00 $ 968,749.93 $ 62,327.93

Federal Regulations (34 CFR 400.10 (b) (2 requires the Department to ensure that financial information reported is accurate and reconciled to the accounting records. The Department should implement procedures to ensure that the Financial Status Report is accurately completed and supported by the accounting records. Detailed reconciliations should be prepared for any adjusted amounts and maintained as a part of the supporting documentation.

Major Federal Program/AWard Affected:
u. S. Department of Education
Vocational Education - Basic Grants to States - CFDA No. 84.048

Federal A~encies With Other Affected Programs:

U. S. Department of Education

SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-99-03

As part ofour examination, we reviewed tracking documents used bythe Department ofEducation and Office of School Readiness to determine the status of subrecipient audit reports for the year ended June 30, 1998. Ofthe 548 subrecipients identified on the tracking documents, 346 had not submitted their audits within the nine month period as required by OMB Circular A-133. This noncompliance is due to subrecipient audits not being performed in a timely manner.

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DEPARTMENT OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
"EDERAL AWARD FINDINGS AND QUESTIONED COSTS
;UBRECIPIENT MONITORING ;ubrecipient Audit Reports Not Received Within the Required Time Period "inding Control Number: FA-414-99-03 \. subsequent review ofthe status of the 346 audits not submitted by the due date indicated that all but one Lad been submitted by January 13,2000. It was noted during our examination that the Department of klucation and the Office ofSchool Readiness utilized a program review stafffor interim compliance reviews )f all subrecipients in accordance with the provisions ofOMB Circular A-133. v.lajor Federal Promm/AWard Affected: ]. S. Department ofEducation
Vocational Education - Basic Grants to States - CFDA No. 84.048
"ederal Agencies With Other Affected PrOfUalllS:
]. S. Department of Agriculture ~orporation for National and Community Service ]. S. Department ofDefense ]. S. Department ofEducation ]. S. Department ofHealth and Human Services
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