Management report, Georgia Agrirama Development Authority, a component unit of the state of Georgia,year ended June 30, 2002

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GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY MANAGEMENT REPORT -TABLE OF CONTENTS-

LETTER OF TRANSMITTAL

SECTION I

SELECTED FINANCIAL INFORMATION

EXHIBITS

A ANALYSIS OF CHANGES IN FUND BALANCE

BUDGET FUND

1

B SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

2

C SCHEDULE OF OTHER REVENUES RETAINED

3

SECTION II 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

DEPARTMENT OF AUDITS AND ACCOUNTS

254 Washington Street, SW, Suite 214

R11sSELL W. H"To,
ST,\TI' .,_UOllOR
(4041Mc--:11.c

Atlanta, Georgia 30334-8400

January 6, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Georgia Agnrama Development Authonty
and Honorable Kimberly M Littleton, Executive Director

Ladies and Gentlemen

As part of our audit of the statutory basis financial statements of the State of Georgia presented m the State of Georgia Report of the State Auditor, the basic financial statements of the State of Georgia presented m the State of Georgia Comprehens,ve Annual Fmanc1al Report, and the issuance of a Statewide Smgle Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2002, we have performed certain audit procedures at the Georgia Agnrama Development Authonty A=rdmgly, the financial statements and compliance act1v1t1es of the Georgia Agnrama Development Authority were examined to the extent necessary m order to express an opinion as to the fair presentation of the financial statements contained 1n the foregoing documents and to issue reports on compliance and internal controls as required by the Single Audit Act Amendments of 1996

This Management Report contains mformabon perunent to the financial and compliance act1v1t1es of the Georgia Agnrama Development Authonty as of and for the year ended June 30, 2002 The parucular mformauon provided 1s enumerated m the Table of Contents

This report 1s intended solely for the mformabon and use of management of the State of Georgia and members of the Board and 1s not intended to be and should not be used by anyone other than these specified parties

Respectfully submrtted,

~~:k

RWH JPI

SECTION I SELECTED FINANCIAL INFORMATION

GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND YEAR ENDED JUNE 30. 2002

EXHIBIT "A"

FUND BALANCE - JULY 1. 2001 Reserved Unreserved
ADDITIONS Excess of Funds Available over Expenditures Exh1b1t "B" Un1dent1f1ed Variance
DEDUCTIONS Fund Balance Carried Over from Pnor Year as Funds Available Reserved Unreserved

$

317,158 33

3 165 02

$ _ _ __::32::;0::_3::::2:.::3:..:3:,::..5

$

366,267 53

12 283 55

$

378 551 08

$

317,158 33

3,165 02

$

32032335

FUND BALANCE - JUNE 30 2002

s-~==31=e=5=5=1=o=e

SUMMARY OF FUND BALANCE
Reserved Fed.era\ Financial Assistance tnventones Restrlcted Funds SPLOST Pro1ects
Unreserved Undes,gnated

$

1249480

58,337 94

229,969 54

2 486 01

$

303,288 29

75,262 79

$ =~==37,_8,.5"'5-=1-=0=8

1

GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30. 2002

EXHIBIT "B"

FUNDS AVAILABLE
REVENUES
Federal Revenues
Other Revenues Retained
Total ReYenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Fund Balance Reserved Unreserved

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$

o oo s

475000 $

1 964 720 00

1 575 742 84

s 196472000 $

1,580,492 84 $

4,750 00 -388 9TT 16
-384 227 16

000

317,158 33

000

3 165 02

317,15833 3 165 02

$ 1 964 720 00 $ 1 900,816 19 $ _ _ ___:-6::.:3:..:90=3..::8.:..1

EXPENDII\/RES
Personal SeMces Regular Operating Ex~nses
Travel
Equipment Computer Charges T elecommumcat10ns Per Diem al'D Fees Contracts Capital Outlay Goods for Resale

s $ 1,216 035 00 $ 1 001,079 91

201 000 00

188,884 85

7,000 00

10,360 81

207,000 00

8199 83

9,50000

000

8,000 00

12,723 97

50000

240 00

70,685 00

7,000 00

125,000 00

258,758 B3

120,000 00

47 300 46

$

196472000 $

s 1 534,548 66

214 955 09 12,11515 -3,360 81
19880017 9 500 00 -4 723 97 260 00
63,685 00 -133,758 B3
72 699 54
430,171 34

Excess of Funds Available over Expendrtures

$

366,287 53 $ -=-.;366==2=67~53;;.

2

GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY SCHEDULE OF OTHER REVENUES RETAINED YEAR ENDED JUNE 30 2002

EXHIBIT"C"

Contracts Georgia Department of Natural Resources
Gifts and Grants Restricted Funds Unrestncted
Sales Concession Stand Sales Country Store Sales Drug Store Sales Gate Receipts General Sales On-Srte Manufact\Jred Product Sales
Other Interest Earned Rents Vendor's Compensation of Sales Tax Collections M1scellaneous

$

1,138,720 00

32 225 00
a 959 44

26,629 09 98,266 52 25,95218 182,237 66 24,867 01
7 328 59

4 314 17 4,439 50
56115 21,242 53

$====1=5.,7.,5.,74,;;2;,;84.;.

3

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

GEORIGIA AGRIRAMA DEVELOPMENT AUTHORITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-940-01-01

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number FS-940-01-01

Payroll hab1lrt1es were not being cleared when they were paid This was causing a double entry to the social secunty/med1care expense accounts of our books We were not paying these through proper steps thereby creating this problem We now pay those through the "pay hab1ht1es" function which has eliminated this problem only

SECTION Ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Accounting Controls (Overall) Finding Control Number FS-940-02-01
Accounting procedures of the Georgia Agnrama Development Authonty were insufficient to provide adequate controls over the general ledger The following defic1enc1es were noted
1 The Authority recorded the receipt of State funds through the Department of Natural Resources directly to an accounts receivable account This resulted in the accounts receivable account having a negative (credit) balance at fiscal year-end Revenue should be recorded with an IrntIal debit to accounts receivable and a credit to revenue as funds become available Cash receipts should then be applied against the accounts receivable account
2 The Railroad Enhancement Grant and the Gifts and Grants revenue accounts had ongoing cumulative balances from prior years Revenues and expenditures should be closed to fund balance at year-end
3 Other donations in the amount of $15,299 60 were recorded as expensecredrts This resulted in both revenues and expenditures being understated in the general ledger
In addItIon, an analysis of the Authority's general ledger and other accounting records revealed that certain transactions were not being recorded on the general ledger as follows.
1 The petty cash account on the general ledger showed a balance of$- 06, when the actual balance was $1,800 00
2 The inventory account on the general ledger showed a balance of $86 26, when the actual balance was $58,337 94
3 Vanous hab1hty accounts on the general ledger had balances totaling $22,159 34, but documentation provided supported only $19,789 51 In accounts payable
Audrt adJusting entries were made to correct the above items However, an unidentified variance of $12,283 55 remained at June 30, 2002, and this amount Is reflected on Exh1b1t "A" of this report

GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEME:-JT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Accounting Controls (Overall) Finding Control Number FS-940-02-01
Procedures should be implemented by the Authority to establish controls to ensure that transactions are recorded correctly and to the proper account The Authority should also ensure that all transactions are recorded on the general ledger
Subsequent to the date of this report, the Authonty hired a consultant to advise the Authonty on corrective procedures to ensure the fiscal year 2003 general ledger 1s properly maintained
MANAGEMENT'S RESPONSE:
Adequate Controls Over the Accounting Records
1 While an entry was in accounts receivable for the DNR authority payment, please note that many automatic" entries had been created since the Georgia Agnrama's conversion to computer bookkeeping These automatic entnes occur due to lack of properly trained staffing when posting income received In this same regard, no conversion procedures were used when Quicken was converted to Qu1ckBooks in June of 1999 Therefore manual ledgers had been given to auditors upon their arrival for the management rev1ew/aud1t each year since that time Other than operating expenditures and internal income generated, no computer reports had ever been used by the audit team
2 Evidently the Georgia Agrirama has not made closing year end entries in the past and this had not been pointed out or been listed as a problem The Railroad Enhancement grant account referred to in this finding has been handled in the same manner since its inception of December 2000 and had ongoing cumulative balance from pnor fiscal year end also at the FY 01 audrt
3 As stated above, the donations transactions had been reported via hand kept entries When deposits were made the automatic entry made by Quicken and/or Qu1ckBooks were not used for reporting purposes Automatic entries from past years of posting were in the general ledger that was not used

GEORGIA AGRIRAMA DEVELOPMENT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
MANAGEMENT'S RESPONSE: (continued)
Transactions not Recorded on the General Ledger
1 Assets, which would have included the referenced petty cash, have never been kept on the computer, only checking account balances The 06 balance was a keypunch error into this asset account, again which was not used for any reporting purpose
2 Again the assets, including inventory, were not kept on the accounting computer The $86 26 entry referred to here Is again a "trash" item All inventory, retail, ff&e, machinery, etc was kept by hand count and given in a report to the auditors upon their amval.
3 Again, the hard figure given of $19,789.51 was confirmed with manual record keeping
All manual ledgers listing income, expenditures and inventory were used for the work papers in this audit iust as they had been in the past However, resale inventory has always been a manual count and Is only done at fiscal year end Therefore as items are sold, they are not taken off inventory Over the many years that this had been handled in this manner, each audit produced an adJusting entry for the difference in inventory It Is our opinion that the variance referenced in Finding Control Number FS-940-02-01 Is largely due to manual inventory control that we are now addressing through the purchase of a Point of Sale inventory control system
In summarizing these findings, the problems occurred due to lack of proper training regarding double entry general ledger bookkeeping, no checks and balances of general ledger entries, and manual inventory control The Controller/Assistant Director has been instructed to concentrate pnmanly on the controller/accounting duties of this position rather than those of site operations, which had been the daily routine In the past An ongoing revIew/revIsIon of FY 03 entries Is being conducted in accordance with the State Chart of Accounts and accounting procedures In addition, we have hired an independent Certified Public Accountant consultant to advise us on these corrective procedures and any future issues This should prevent findings such as the above We also hope that the point of sale inventory control system will help to eliminate this problem