Management report, Department of Education, an organizational unit of the state of Georgia, year ended June 30, 2001

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DEPARTMENT OF:EDUCATION

MANAGEMENT REPbRT

- TABLE OF CONTENTS -

LETTER OF TRANSMITTAL

SECTION I

SELECTED FINANCIAL INFORMATION

EXHIDITS

A ANALYSIS OF CHANGES IN FUND BALANCE

BUDGET FUND

1

SCHEDULES OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

B

"A" DEPARTMENT OF EDUCATION

2

C

"B" LOTTERY FOR EDUCATION

4

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

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

USSEI.I. W. HINTON
STATE AUDITOR (404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w.. Suite 2 J4 Atlanta. Georgia 30334-8400
February 1, 2002

Honorable Roy E. Barnes, 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 ofour audit ofthe statutory basis financial statements ofthe State ofGeorgia presented in the State ofGeorgia Report ofthe State Auditor, the general purpose financial statements ofthe 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, 2001, 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 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 ofEducation as of and for the year ended June 30, 2001. The particular information provided is enumerated in the Table of Contents.

This report is intended solely for the information and use of management of the Department of Education and members of the Board and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,
r-~-l~wS.iH..i.cnnt.oWn . 4...:k State Auditor

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SECTION I SELECTED FINANCIAL INFORMATION

".
DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FuND
"An DEPARTMENT OF EDUCATION YEAR ENDED JUNE 30, 2001

EXHIBIT"B"

FUNDS AVAILABLE REVENUES
State Appropriation Federal Revenues Other Revenues Retained
CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 5,638,810,474.00 $ 5,638,810,474.00 $

930,394,626.00

726,534,830.43

3,259,690.00

8,337,637.71

0.00 -203,859,795,57
5,077,947.71

$ 6,572,464,790,00 $ 6,373,682,942.14 $ -198,781,847.86

8,535,880.00

68,619,262.81

60,083,382,81

$ 6,581,000,670.00 $ 6,442,302,204,95 $ -138,698,465,05

4,066,386.92 3,763,143.97
729,393.28 31,935.32
156,567,60 4,347,298.88
667,787,33 1,584,905.38 13,840,072.51
161,600.00 1,566,75
0.00 0,00 0.00 0.00 0.00 0,00 0,00 0.00 0.00 0.00 0,00 2,000.00 65,00 0.00 302,578.12
5.00 3.00 0.00
30,259,40 120,000.00
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,

DEPARTMENT OF EDUCATION

SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

"An DEPARTMENT OF EDUCATION

YEAR ENDED JUNE 30, 2001

EXHIBIT"B"

Excess of Funds Available over Expenditures -3-

$ -44,556,576,29 $ -44,556,576,29

DEPARTMENT OF EDUCATION SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPAREO TO BUDGET BUDGET FUND
"B" LOTTERY FOR EDUCATION YEAR ENDED JUNE 30, 2001

EXHIBIT"C"

FUNDS AVAILABLE REVENUES
State Appropriation CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 157,441,836.00 $ 157,441,836.00 $

10,000,000.00

10,000,000,00

$ 167,441,836.00 $ 167,441,836.00 $

0,00 0,00 ~ 0.0~ 0

EXPENDITURES
Capital Outlay Computers in the Classroom Post Secondary Options Applied Technology Labs Fort Discovery National Science Center

$ 121,610,961.00 $ 120,891,961.00 $

39,485,875.00

39,485,873.00

.4,500,000.00

3,121,675.44

1,710,000.00

1,600,000.00

135,000.00

135,000.00

719,000.00 2.00
1,378,324.56 110,000.00 0.00

$ 167,441,836.00 $ 165,234,509.44 $

2,207,326.56

Excess of Funds Available over Expenditures

$ 2,207.326.56 $ 2,207,326.56

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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, 2001

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-414-99-02 FS-414-99-03 FS-414-99-04 FS-414-00-01 FS-414-00-02 FS-414-00-03
FS-414-00-04 FS-414-00-05
FS-414-00-06

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Further Action Not Warranted See Office of School Readiness' Management Report See Office of School Readiness' Management Report Previously Reported Corrective Action Implemented -
See Corrective ActionlResponses See Office of School Readiness' Management Report Previously Reported Corrective Action Implemented -
See Corrective ActionlResponses Partially Resolved - See Corrective ActionlResponses

CORRECTIVE ACTIONIRESPONSES

EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Monitor QBE Program Expenditure Requirements
in School Systems with Charter Schools Finding Control Number: FS-414-00-03

. We concur with this finding. Since the charter schoo11aw exempts a charter school from the expenditure requirements in Code Section 20-2-167 (a), local school systems should exclude expenditures and appropriate QBE funding amounts from any compliance tests. However, at the present time, it would be a difficult task for both the Department and local systems to comply with this requirement. The QBE Allotment Sheets were at the system level for FY2000, and there was not an easy or practical way to separate funds for a charter school. While FY2000 school level expenditures could be separated without too much trouble, separating the QBE funding by school would be a more difficult task for a system. With the FY2001 QBE allotment sheets at the school level and local system recording .expenditures at the school level, there should be no problems in FY2001 with eliminating the charter schools from the expenditure compliance tests.

GENERAL LEDGER REVENUEIRECEIVABLESIRECEIPTS Inappropriate Accounting Practice Finding Control Number: FS-414-00-05

The Department was not made aware of this finding until after the audit was concluded. Entries were made in FY2000 to record unearned grant balances, but they were made to

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DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

GENERAL LEDGER REVENUEIRECEIVABLESIRECEIPTS Inappropriate Accounting Practice Finding Control Number: FS-414-00-05

surplus and reserve accounts. In FY2001, entries will be made to surplus and revenue, as appropriate, and unearned grant accounts. The change in recording grant balances should resolve this finding.

GENERAL FIXED ASSETSIPROPERTY MANAGEMENT , Inadequacies in Operation and Property Management System Finding Control Number: FS-414-00-06

See our corrective action/responses to finding number FA-414-00-0 I in the Prior Year Federal Awards Findings and Questioned Costs.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-414-99-01 FA-414-99-03 FA-414-00-01 FA -414-00-02
. FA-414-00-03
FA -414-00-04

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

CORRECTIVE ACTIONIRESPONSES

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-00-01

1. Reconciliation of equipment for this department is conducted by the following: All purchase orders (PO) are screened for proper accountability in PeopleSoft's Asset Management for all equipment purchases for the Department. All incorrect expense account numbers are emailed to the initiator of the PO for correction: the Agency

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DEPARTMENT OFEDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-00-01
Procurement Officer is carbon copied (cc:) on the email. A copy ofthe PO's lines and distribution are printed by Print Screen on the computer. If equipment is under $1,000.00 and is not accounted for on Asset Management, a green Property of Department of Education decal is mailed to the property manager of the unit that initiated the PO. Ifthe equipment is $1,000.00 or greater, or ifthe under $1,000.00 but is deemed to be accounted for, the copies will be kept until the signed PO is received in this office for generating the DE Form 0513, Receipt of Equipment form. This equipment will have the DOE barcode decal affixed.
2. On many occasions, it has been discovered that Asset Management fails to include all inventory additions to the DOE Property System. This has been reported to the DOAS PeopleSoft Team.
3. The State Auditor tested this area and no exceptions were noted, however, the audit finding indicates exceptions. The following is what the auditor and I tested and found to be in order: No.1: PO 41400-065-0000020114: Receiving report's invoice indicated a cost of $4,329.00 instead of the initial $4,436.00 amount on the PO. No.2: PO 41400-652-0000022246: This equipment was never received by the Agency Property Officer, therefore, never decaled nor entered into the DOE Property System. This equipment was received in the DOE mailroom but was either misplaced or stolen at that point. This equipment had a cost of $3,045.00 that was paid by Accounting Services, since there was a signature for receiving this equipment by the DOE Mailroom. No.3: PO 41400-652-0000021202: Line item no. 2-1 was emailed to the initiator that the expense account number would have to be changed to 616001, $1,234.00; No.4: PO 41400-065-0000020115: Receiving report's invoice signed by DOE personnel indicated a cost of$1,592.00 instead of the initial $1,663.00 amount on the PO. No.5: PO 41400-652-0000020600: All the items had been entered; however, PeopleSoft's Asset Management only recorded six (6) of the seventeen (17) entered. The remaining eleven (11) were re-added during the DOA Auditors visit this year at an adjustment of$16,995.00 to DOE Property System. No.6: PO 41400-652-0000021432: Receiving report's invoice indicated a cost of $9,588.00 instead of the initial $9,589.00 amount on the PO.
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DEP ARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDiNds AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
I PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
EQUIPMENT AND REAL PROPER'I:Y MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-00-01
No.7: PO 41400-065-0000020357: Equipment received on 09/27/1999 and entered on the DOE Property System in the amount of$I,663.00: Error in PeopleSoft's Asset Management. No.8: PO 41400-652-0000021916: Receiving report's invoice signed indicated a cost of$2,058.00 instead of the initial $2,296.00 amount on the PO. No.9: PO 41400-065-0000022387: Purchase Order Correction dated 04/26/2000 indicated a unit cost change of$1 ,922.00 instead ofthe initial $2,042.0.0amount on the PO. No. 10: PO 41400-053-0000022995: This PO was added to the DOE Property System on 07/13/2000 with a total cost of$9,457.98: Errorin PeopleSoft's Asset Management.
With the above noted, this reduces the $38,450.98 to $0.00, as what was found during the original test by the State Auditor.
4. The State Auditor, tested this area and no exceptions were noted, however, the audit finding indicate exceptions. The following is what the State Auditor and I tested and found in order: No.1: Decal 00-0009463: $1,050.00, was deleted by DOAS Transaction Number BR595-99. This record was returned from the Department of Archives and History, Records Center, and shown to the State Auditor as supporting documentation to delete this item. No.2: Decal 00-0041257: $1,115.00, had been deleted because this was a duplicated entry into the DOE Property System as indicated by Decal 00-0041086, $1,115.00. This was, also, shown to the State Auditor by the supporting Property Add Form for the Reading Challenge Program, Eastside Elementary, location 024634, to delete this item.
With the above noted, this reduces the $2,165.00 to $0.00, as what was found during the original test by the state auditor.
5. This information was never brought to my attention for FY2000. These installment purchases were entered into the DOE Property System prior to my arrival to this agency. In the past, I was reluctant to change the cost for the above but on March 2, 2001, the following decals were changed:
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DEPARTMENT OF EDUCAnON AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-00-01
No.1: Decal 00-0021481, amount changed from $10;701.36 to $9,700.00. No.2: Decal 00-0013149, amount changed from $9,819.72 to $9,700.00. No.3: Decal 00-0020763, amount changed from $30,300.00 to $32,300.00. No.4: Decal 00-0021451, amount changed from $24,775.00 to $25,575.00.
With the above change, it reduces the $1,678.92 to $0.00
Physical Inspection: 1. Failure by unit to properly account for their inventory whether the item was moved by
an employee of the unit or Technology Services: 2. Equipment not controlled properly will result in surprise findings of equipment. 3. A unit who fails to properly inventory equipment or inventories completed quickly will
result in equipment being indicated as "missing". This is a result of poor inventory inspection techniques by the unit.
The six (6) items of equipment found were for equipment under the $1,000.00 threshold for capturing on the DOE Property System.
SUBRECIPIENT MONITORING Failure to Establish Administration Agreement/Contracts Finding Control Number: FA-414-00-02
1. The procedures used by the Department ofEducation (DOE) and North Georgia RESA during FY2000 were continuations of historically approved, audited, and accepted practices of previous years. Activities were monitored and supervised by DOE personnel in such a manner as to ensure compliance with the provisions of Perkins regulations regarding appropriate use of funds. Subsequent to FY2000, the practices cited in theabove referenced finding were discontinued between DOE and RESA. The RESA now has no fiscal agency responsibilities for DOE. If in the future such a relationship should be again established, formal agreements will be developed and implemented.
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DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
SUBRECIPIENT MONITORING Failure to Establish Administration Agreement/Contracts Finding Control Number: FA-414-00-02
2. The activities of the two consultants were continuations of services that were contracted in FY1999. During FY2000 the consultants provided services on an "as needed" basis as requested and approved by the Department ofEducation. Performance of services was documented by invoices provided by the consultants and verified by DOE personnel before approval for payment was given by DOE.
The circumstances of the services provided for the Related Vocational Instructional program were similar to those of the consultants referenced above. Services were rendered for the benefit ofspecial needs participants in DOE sponsored activities, and performance was evaluated on a continuous basis by a DOE program manager before approval for payments were granted. Subsequent to FY2000 'the practice of issuing payments to contractors through the RESA was discontinued. Procedures have been implemented to assure that fully executed current contracts are in place that clearly define the terms of agreements between DOE and contractors.
SUBRECIPIENT MONITORING Approval for Improper Expenditure Finding Control Number: FA-414-00-03
1. The utilization of the computer equipment reference in this citation is considered by DOE personnel to be directly related to the statewide administration of provisions of the Perkins Act. Purchase of the equipment was necessary in order for services requested by DOE to be provided. These services included the operation and maintenance of a 24 hour/day, 7 day/week server on which internet web sites could be hosted. Sites from which all vocational curriculum materials would be available for download on demand, on which vocational staff development opportunities would be published including the posting of course descriptions, dates of course offerings, and the capability of online registration for courses, on which Career/Technology Student Organization information would be published were required. The expenditure offunds from the referenced source for the purchase ofthis equipment is thought to be proper.
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DEPARTMENT OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
.PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
SUBRECIPIENT MONITORING Approval for Improper Expenditure Finding Control Number: FA-414-00-03
2. The transaction cited has been reviewed by DOEpersonnel and has been determined to be appropriate. Documentation originally submitted was general in nature. At DOE's request, the vendor supplied a breakdown of specific information as to services performed, supplies, dates, and associated costs. An evaluation of the information is revealed that the value ofthe products provided by the contractor were consistent with the payment that was issued to the vendor.
SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-00-04
We concur with this finding. The Department ofEducation is responsible for tracking and reviewing the audits oflocal units ofadministration (LUAs). However, the Department of Audits is required by state law to audit "the LUAs, because LUAs receive the majority of their funding from the state. 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 ofLUAs to be audited, the Department ofAudits cannot complete the audits in the time period required by OMB Circular A-133. 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 in the LUA audits after being received from the Department of Audits.
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SECTIONlli . CURRENf YEAR FINDINGS AND QUESTIONED COSTS

DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURES/LIABILITIESIDISBURSEMENTS Information Systems Not Accessible to Employees and Not Properly Documented Finding Control Number: FS-414-01-01
The Department ofEducation allocates funding to local school systems based on a funding formula established by the Quality Basic Education (QBE) Act. These QBE allocation calculations are both technical and complex. This complexity was greatly increased with the passage ofHouse Bill 1187 (Education Reform Act). Allotment allocations are now required to be calculated for individual schools rather than at the local school system level. Currently, an independent contractor employed by the Department is performing the allocation calculations. The basis for these QBE calculations is written in programmer's language by the independent contractor. The Department has not required the contractor to develop a software program for Department personnel to use or an operating manual documenting the methodology utilized for the QBE calculations. As a result, no Department employees are able to access the allocation calculations. Department personnel maintain parallel data at the system level to have some assurance of the reliability of the data produced by the independent contractor. However, Department personnel are not able to compute allocations at the school level as now required by State law.
Failure to require the independent contractor to develop both a software program to be used by Department personnel and an operations manual could result in loss of QBE allocation data or a misallocation of QBE funds to school systems.
The Department of Education should review their operating procedures in relation to independent contractors to ensure that critical Department functions are not interrupted. Specifically, the QBE , allocation and payment system should be made accessible to applicable Department personnel and properly documented.
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FS-414-01-02
Our examination included a review ofthe internal accounting controls utilized by the Department of Education 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-414-01-01.
The Department is required to maintain equipment inventories in accordance with provisions ofState laws and regulations. The discrepancies identified were caused by the Department's failure to follow guidelines for maintaining equipment inventories.
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FS-414-01-02
Failure to maintain accurate equipment inventory records causes internal reports to management to be misleading and can result in erroneous decisions by management concerning current and future equipment needs.
The Department should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with State laws and regulations.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FA-414-01-01
Our examination included a review ofthe 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 updated incorrectly. Testing of current year additions revealed two (2) additions that had been updated onto the equipment inventory records incorrectly by the amount of $6,427.75.
In addition, six-hundred-thirty-six (636) equipment items were selected from certain locations to test the accuracy of the Department's property management records. These items contained a value of $1,515,295.46 out ofa population of$9,645,639.85 and were selected for the purpose oflocatingthe equipment as recorded in the inventory records. Total general fixed assets of the Department amounted to $40,094,273.22. The following deficiencies were noted:
1. Twenty (20) items totaling $47,018.53 could not be located.
2. Nine (9) items were found in locations other than the location indicated in the equipment inventory records.
3. One (1) item was found that was recorded as missing on the inventory records.
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control NUI?ber: FA-4l4-01-0l
Also, during the physical inspection testing, seventy-seven (77) items of equipment were located in our test locations, which were not included in the equipment inventory records for the particular location. The majority of these items were in the Instructional Technology location.
The Department is 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 failure to follow guidelines for maintaining equipment inventories.
Failure to maintain accurate equipment inventory records causes internal reports to management to be misleading and can result in erroneous decisions by management concerning current and future equipment needs.
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 Program/Award Affected:
U. S. Department of Education Title I Grants to Local Educational Agencies - CFDA No. 84.010
Federal Agencies With Other Affected Programs:
u. S. Department of Agriculture
U. S. Department of Education
SUBRECIPIENT MONITORING Approval for Improper Expenditures Vocational Education - Basic Grants to States (CFDA 84.048) Amount: $18,178.00 Finding Control Number: FA-414-01-02
The management report for fiscal year 2000 reflected questioned costs of$8,978.00 for the purchase of computer equipment and $9,200.00 for services provided by a subrecipient vendor. These amounts were charged as direct expenditures to Perkins ill Program administration funds. The Georgia Department of Education's (GDOE) response to this finding (FA-414-00-03), as shown in Section Il ofthis report (Auditee's Response to Prior Year Findings and Questioned Costs), indicated that the finding concerning the subrecipient was resolved. The Department ofAudits and Accounts
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DEPARTMENT OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SUBRECIPIENT MONITORING Approval for Improper Expenditures Vocational Education - Basic Grants to States (CFDA 84.048) Amount: $18,178.00 Finding Control Number: FA-414-01-02
does not believe that sufficient corrective action was implemented by GDOE to resolve this finding. GDOE based its conclusion to resolve this finding on inadequate documentation gathered by Department personnel relative to the approval of direct expenditures.
In our prior year finding (FA-414-00-03), we reported that the acquired computer equipment was utilized by the North Georgia Regional Educational Service Agency (RESA) to upgrade the RESA's computer hardware to facilitate accounting software required by the GDOE. We found that such a cost was not totally and directly related to Perkins ill and in line with OMB Circular A-87 provisions. Accordingly, we found that such a cost should be treated as an indirect cost and thus claimed through the RESA's approved indirect cost rate. With respect to the $9,200.00 payment . made to a vendor, we found that there was insufficient documentation to determine that services and materials were provided by the vendor as indicated on the vendor's invoice. Without sufficient documentation that services were rendered by the vendor, the payment to the vendor and charges to Perkins ill funds were unallowable.
It is the position of the Department of Audits and Accounts that the additional documentation provided by GDOE supporting resolution of these two charges against Perkins ill funds was insufficient. While GDOE provided documentation indicating that the computer equipment would , be utilized for services requested by GDOE for the Vocational Education program, GDOE was unable to substantiate that the purchased computer equipment was allowable as a direct charge against Perkins ill funds. Further, our review ofthe additional documentation provided by GDOE to support the services provided by the vendor did not sufficientlyjustify the cost to Perkins ill funds .. Given the above, we believe that the questioned costs of$18,178.00 remains unresolved.
We recommend that the United States Department ofEducation review this matter to determine the manner in which the $18,178.00 of questioned costs should be resolved.
SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-01-03
As part of our examination, we reviewed tracking documents used by the Department ofEducation to determine the status of subrecipient audit reports for the year ended June 30, 2000. Of the twohundred-fifty-five (255) subrecipients identified on the tracking documents, two-hundred-two (202) had not submitted their audits within the nine-month period as required by OMB Circular A-l33. 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 OUESTIONED COSTS
YEAR ENDED JUNE 30, 2001

FEDERAL AWARD FINDINGS AND OUESTIONED COSTS

SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period Finding Control Number: FA-414-01-03

A subsequent review ofthe status ofthe two-hundred-two (202) audits not submitted by the due date indicated that thirteen (13) had not been submitted by January 31,2002. It was noted during our examination that the Department ofEducation utilized a program review stafffor interim compliance reviews of all subrecipients in accordance with the provisions of OMB Circular A-133.

Major 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 84.027 Special Education - Preschool Grants - CFDA 84.173 Vocational Education - Basic Grants to States - CFDA No. 84.048

Federal Agencies With Other Affected Programs:

U. S. Department of Agriculture

.

Corporation for National and Community Service'

U. S. Department of Defense

U. S. Department of Education

'U. S. Department of Health and Human Services

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