MANAGEMENT REPORT OFFICE OF THE GOVERNOR AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 1997 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS 254 WASHINGTON STREET ATLANTA, GEORGIA 30334-8400 OFFICE OF THE GOVERNOR MANAGEMENT REPORT - TABLE OF CONTENTS - LETTER OF TRANSMITTAL SECTION I SELECTED FINANCIAL INFORMATION EXIllBITS A ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND 2 B SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND 3 C RECONCILIATION OF SALARIES AND TRAVEL 4 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 CLAUDE L. VICKERS STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400 November 21, 1997 Honorable Zell Miller, Governor Members ofthe General Assembly of Georgia and Honorable Timothy P. Burgess, Director Office of Planning and Budget Ladies and Gentlemen: As part of our audit of the statutory basis financial 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 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, 1997, we have performed certain audit procedures at the Office ofthe Governor. Accordingly, the fmancial statements and compliance activities of the Office of the Governor 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 Office of the Governor 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 Office ofthe Governor. However, this report is a matter of public record and its distribution is not limited. Respectfully submitted, ~~ Claude L Vickers State Auditor CLV:cm SECTION I SELECTED FINANCIAL INFORMATION OFFICE OF THE GOVERNOR ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND YEAR ENDED JUNE 30,1997 EXHIBIT "A" FUND BALANCE - JUNE 30, 1997 SUMMARY OF FUND BALANCE Reserved State Funds Federal Financial Assistance Crime Victims Emergency Fund Georgia Council for the Arts Georgia Children and Youth Coordination Council Georgia Emergency Management Agency Disaster Assistance Matching Disaster Assistance Contingency Local Block Grant Program SurplUS $ 19,260,485.88 $ 23,734,03 $ 19,284,219,91 $ 700,000,00 35,343,33 3,443,794.80 25,205.36 41,401,83 12,935,735.51 560,920.31 11,028,24 $ 17,753,429.38 1,507,056,50 $ $ 700,000,00 35,343,33 3,443,794,80 25,205,36 41,401,83 12,935,735,51 560,920.31 11,028.24 $ 17,753,429,38 23,734.03 1,530,790.53 $ 19,260,485,88 $ -2- 23,734.03 $ 19,284,219,91 OFFICE OF THE GOVERNOR SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND 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) $ 29,638,219.00 $ 28,938,219.00 $ 233,942,507.00 175,452,873.88 3,344,519.00 2,262,940.09 $ 266,925,245.00 $ 206,654,032.97 $ -700,000.00 -58,489,633.12 -1,081,578.91 -60,271,212.03 0.00 23,896,565.28 23,896,565.28 $ 266,925,245.00 $ 230,550,598.25 $ -36,374,646.75 EXPENDITURES Personal Services Regular Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Cost of Operations Mansion Allowance Intern Stipends and Travel Art Grants of State Funds Art Grants of Non-State Funds Humanities Grant - State Funds Children and Youth Grants Juvenile Justice Grants Georgia Crime Victims Assistance Program Grants to Local Systems Grants - Local EMA Grants - Civil Air Patrol Grants - Disaster Investment for Modernization $ 17,283,331.00 $ 15,940,323.63 $ 3,579,080.00 3,423,840.15 364,931.00 253,324.72 204,187.00 142,287.73 637,822.00 602,614.40 1,098,674.00 1,023,170.05 636,139.00 565,018.36 48,270,225.00 27,854,292.83 3,432,344.00 2,942,389.59 40,000.00 40,000.00 240,000.00 198,277.49 3,872,500.00 3,872,500.00 241,305.00 232,572.23 150,000.00 150,000.00 290,975.00 290,975.00 4,017,924.00 2,352,517.21 2,276,000.00 684,400.00 1,650,817.00 60,000.00 177,194,591.00 700,000.00 1,849,626.10 684,400.00 1,636,321.47 60,000.00 148,758,122.60 0.00 1,343,007.37 155,239.85 111,606.28 61,899.27 35,207.60 75,503.95 71,120.64 20,415,932.17 489,954.41 0.00 41,722.51 0.00 8,732.77 0.00 0.00 1,665,406.79 426,373.90 0.00 14,495.53 0.00 28,436,468.40 700,000.00 $ 266,925,245.00 $ 212,872,573.56 $ _---=54;..;.:.;:,0;::;52~,6;;.;7...:.1:..;.44...:... Excess of Funds Available over Expenditures -3- $ 17,678,024.69 $===1=7=,6.7.8.:;;,0=2=4=.6=9 OFFICE OF THE GOVERNOR RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30,1997 EXHIBIT"C" Totals per Annual Supplement Accruals June 30, 1996 SALARIES $ 13,547,327,80 $ TRAVEL 276,228.96 -13,653.83 -450.00 $ 13,533,673,97 $ 275,778.96 -4- SECTION II AUDlTEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS OFFICE OF THE GOVERNOR 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 422-96-01 422-96-02 Partially Resolved - See Corrective ActionlResponses Unresolved - See Corrective ActionlResponses CORRECTIVE ACTIONIRESPONSES GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number 422-96-01 Corrective action has been taken to address the deficiencies in procedures used to account for general fixed assets. The focus of this fmding was the Georgia Emergency Management Agency (GEMA),which is administratively attached to the Office of the Governor. The following actions have been taken: 1. Quarterly the Administrative Division of the Office of Planning and Budget provides GEMA with copies ofinventory reports for review and updating. 2. Recently, GEMA has reassigned responsibility for inventory management and control. They are more aggressive in the resolution of inventory discrepancies. 3. Specific actions related to audit findings of missing inventory and unrecorded transactions in the last audit include; (a) Four pieces of equipment totaling $16,941.39 have been located, (b) Three pieces of equipment totaling $7,603.00 are recorded as missing in the inventory system and will be removed from inventory pending authorization from GEMA, (c) Four pieces of equipment totaling $5,565.00 and listed as surplused or traded-in will be removed from inventory pending authorization from GEMA, (d) Four pieces of equipment totaling $5,427.82 are still missing and additional efforts are being made to locate this property, (e) One piece of equipment totaling $1,860.00 has been removed from the inventory system. EXPENDITURESILIABILITIESIDISBURSEMENTS Improper Reporting and Budgeting of Expenditures Finding Control Number 422-96-02 A unique State Chart of Account and Object Class, entitled Criminal Justice Grants has been established for budgeting and reporting grants awarded and previously classified as Per Diem, Fees and Contracts. The corrective action plan was implemented July 1, 1997. PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS 422-96-01 Previously Reported Corrective Action Implemented SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS OFFICE OF THE GOVERNOR SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1997 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FS-422-97-01 For the year under review, our examination included a review of the internal accounting controls utilized by the Office ofthe Governor in maintaining their State Property System and testing the system for compliance with State laws and regulations. Sixty-four (64) equipment items were selected to test the accuracy of the Office of the Governor's property management records. These items contained a value of $295,203.94 out of a population of $3,144,666.88 and were selected for the purpose of locating the equipment as recorded in the inventory records. The following deficiencies were noted at the Georgia Emergency Management Agency, which is administratively attached to the Office ofthe Governor: (1) Two (2) items totaling $2,106.00 could not be located. (2) One (1) item in the amount of $2,724.80 was surplused, but was not removed from the inventory records. The Office ofthe Governor is required to maintain equipment inventories in accordance with provisions of the State Property Management System Manual. The discrepancies identified were caused by the Office of the Governor's failure to follow guidelines for maintaining equipment inventories. The Office of the Governor's management should periodically review established internal controls to ensure that equipment inventories are maintained in accordance with the State Property Management System Manual. EXPENDlTURESILIABILITIESIDISBURSEMENTS Improper Reporting and Budgeting of Expenditures Finding Control Number: FS-422-97-02 In the year under review, the Office of the Governor expended $25,726,211.01 under the Object Class - Per Diem, Fees and Contracts for contracts. Funds budgeted for contracts under Object Class - Per Diem, Fees and Contracts normally contemplate that goods and/or services will be received by the State Agency. However, a random sample of 10 contracts revealed that the Office of the Governor simply provided funds to various parties and received no goods or services in return. Th.e related expenditures totaling $350,551.81 for the 10 items tested should have been charged to a grants object class instead of Per Diem, Fees and Contracts. The Office of the Governor should ensure that grants are correctly budgeted and recorded in the accounting records.