STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS I EAST CENTRAL TECHNICAL COLLEGE FITZGERALD, GEORGIA INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Russell W. Hinton State Auditor EAST CENTRAL TECHNICAL COLLEGE - TABLE OF CONTENTS - INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES EXHIBITS A SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT 1 B STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET 2 RUSSELL W. HINTON STATE AUDITOR (404) 858-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 December 17, 2008 Members of the State Board Technical and Adult Education Members of the Local Board of Directors and Honorable E. J. Harris, Interim President East Central Technical College Independent Accountant's Report on Applying Agreed-Upon Procedures Ladies and Gentlemen: We have performed the procedures enumerated below, which were agreed to by the College and the Administrative Central Office (Oversight Unit) ofthe Department ofTechnical and Adult Education, solely to assist you in assessing the accuracy ofthe annual financial statement information reported to the Administrative Central Office by the College for inclusion in the State of Georgia's Comprehensive Annual Financial Report (CAFR) and Single Audit Report; and to assist you in assessing the accuracy of budget basis information provided in the Summary Budget Comparison and Surplus Analysis Report and Statement ofProgram Revenues and Expenditures by Funding Source Compared to Budget, which is attached as Exhibits A and B, respectively. East Central Technical College's management is responsible for the financial information reported to the Administrative Central Office of the Department of Technical and Adult Education. This agreedupon procedures engagement was conducted in accordance with attestation standards established by the American Institute ofCertified Public Accountants. The sufficiency ofthese procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. 1. Review selected balance sheet items reported on the annual financial statement worksheets (cash, accounts receivable, accounts payable, deferred revenues, net assets). Confirm that these items have adequate supporting documentation and are properly reconciled to the College's general ledger. Net Assets were incorrectly reported on the Statement ofNet Assets. Invested in Capital Assets, Net ofRelated Debt was overstated and Unrestricted Net Assets was understated by $49,530.51. This was corrected through proposed GAAP entry adjustments. 2. Obtain the College's GAAP basis worksheets for Statement ofNet Assets and Statement of Revenues, Expenses and Changes in Net Assets (SRECNA) information that was submitted for inclusion in the State's CAFR and Single Audit. Utilizing test scripts, confirm that financial information presented in these worksheets properly support activity reported in the College's accounting records. We did not note any exceptions as a result of our procedures. 3. Obtain the College's worksheets for financial statement note disclosure information submitted for inclusion in the State's CAFR and Single Audit. Utilizing notes worksheets and other supporting documentation confirm that note disclosures related to Cash, Investments, Accounts Receivable, Capital Assets, Long-Term Debt, Lease Obligations and Retirement Plans have been properly reported. We did not note any exceptions as a result of our procedures. 4. Review the College's year end GAAP basis journal entries. Obtain documentation for GAAP journal entries and confirm that the entries were posted to the College's annual financial statement worksheets. A year end GAAP entry included an adjustment to delete capitalized equipment which should have never been included in the asset listing. In deleting these equipment assets, the College adjusted State Capital Grants and Gifts Revenue instead of Loss on the Disposal of Capital Assets resulting in both line items being understated by $415,298.84. Also in deleting the depreciation activity, the College's adjustments improperly understated Depreciation Expense and overstated Loss on Disposal of Capital Assets in the amount of $172,172.95. The year end GAAP entry posted to capitalize current year donations ofcapital assets was made to an incorrect account. The Local Capital Grants and Gifts of $169,000.00 was recorded as Nongovernmental Capital Grants and Gifts. The year end GAAP entry to record current year deletions was posted to the incorrect account. This resulted in the College understating Other Nonoperating Revenues and Depreciation Expense for $9,473.28. The year end GAAP entries related to the removal of agency fund activity was posted incorrectly. Funds Held For Others and Other Nonoperating Expenditures were overstated in the amount of $86,933.64. The year end GAAP entry related to reclassification of prior year activity was posted incorrectly. Sales and Services revenues and Supplies and Other Services expenses were overstated in the amount of $6,387.36. All of the GAAP entry exceptions noted above were corrected by the College and resubmitted to the Georgia Department ofTechnical and Adult Education. 5. Confirm that State Appropriation revenues, receivables and remittances ofprior year surplus balances have been properly recorded in the College's financial records. Prior year surplus balances should be netted against State Appropriation revenues in the GAAP basis financial statements; however, prior year surplus balances should be reflected as fund balance adjustments on the Budget basis financial statements. We did not note any exceptions as a result of our procedures. 6. Obtain listing ofwrite-offrequests for accounts receivable less than $3,000.00 for fiscal year 2008. Confirm that these write-off requests have been approved by the State Accounting Officer and have been posted to the College's financial statements. We did not note any exceptions as a result of our procedures. 7. Verify that the listing ofsalaries, travel, and professional services reported to the Department of Audits is in accordance with O.C.G.A. 50-6-27 reconciles to amounts recorded in the College's financial statements. We did not note any exceptions as a result of our procedures. 8. Review the year end Budgetary Statements including the Summary Budget Comparison and Surplus Analysis Report (Exhibit A) and Statement ofProgram Revenues and Expenditures by Funding Source Compared to Budget (Exhibit B). Confirm that budget information presented in these statements supports activity reported in the College's accounting records and determine if any budget overexpenditures exist. We did not note any exceptions as a result of our procedures. 9. Obtain documentation for Budget basis reserves reported by the College on the Summary Budget Comparison and Surplus Analysis Report (Exhibit A). Confirm that the reserves are properly documented, valid and appropriate. The College made numerous entries at the end of the year moving expenditures between various fund sources which appeared to be in an effort to manipulate year-end surplus. The College could not provide the auditor with proper documentation to support these entries. For this reason, the accuracy of the reserves and surplus reported could not be confirmed. 10. Review the H.O.P.E. Scholarship Program reconciliation between the College and the Georgia Student Finance Commission. Confirm that information reported to the Georgia Student Finance Commission has been reconciled with H.O.P.E. Scholarship activity reported on the College's financial records. We did not note any exceptions as a result of our procedures. 11. Review the Schedule of Expenditures of Federal Awards information submitted by the College for inclusion in the Statewide Single Audit. Confirm that the information is properly presented and supported by the College's accounting records. We did not note any exceptions as a result of our procedures. 12. Review capital asset records to ensure that (1) subsidiary ledgers are appropriately reconciled to the ledgers, (2) capitalization thresholds are being properly followed, and (3) a complete annual physical equipment inventory is being conducted and that issues noted during the physical inventory are being properly addressed by management. The College failed to maintain the asset management module subsidiary ledger within the Peoplesoft Financial System as required. The difference between the subsidiary ledger and the financial statements of $510,104.08 was reconciled through off-line spreadsheets. East Central Technical College capitalized $24,385.11 of equipment additions that were below the capital asset threshold and $25,145.40 of Improvements Other than Buildings that were not valid current year additions. This caused the Capital Assets to be overstated and the Supplies and Other Services expenses to be understated by $49,530.51. This was corrected through proposed GAAP entry adjustments. 13. Review bank reconciliations during the year under review to ensure that management is preparing them timely and that reconciling items are being addressed by management timely and in an appropriate manner. We did not note any exceptions as a result of our procedures. These agreed-upon procedures do not constitute an audit of the financial statements or any part thereof, the objective ofwhich is to express an opinion on the financial statements or a part thereof. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the specified users listed above and is not intended to be and should not be used by anyone other than these specified parties. - w.~-::k Respectfully submitted, Rus 11 W. Hinton, CPA, CGFM State Auditor RWH:as EXHIBITS EAST CENTRAL TECHNICAL COLLEGE SUMMARY BUDGET COMPARISON SURPLUS ANALYSIS REPORT YEAR ENDED JUNE 30, 2008 EXHIBIT"A" REVENUES State Appropriation State General Funds Federal Funds Other Funds Total Revenues CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance Total Funds Available EXPENDITURES Adult Literacy Economic Development Technical Education Total Expenditures Excess of Funds Available over Expenditures FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned to Georgia Department of Technical and Adult Education Year Ended June 30, 2007 Refunds to Granters Federal Financial Assistance Returned to Georgia Department of Technical and Adult Education Year Ended June 30, 2007 Georgia Department of Education Year Ended June 30, 2007 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Federal Financial Assistance Live Works Projects Prior Year Local Funds Continuing Education Sales and Services Technology Fees Inventories Total Fund Balance BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 6,938,560.00 $ 6,938,559.88 $ -0.12 1,211,355.02 1,022,807.69 -188,547.33 4,022,037.79 2 718 526.77 -1 303 511.02 $ 12,171,952.81 $ 10,679,894.34 $ -1,492,058.47 0.00 334 495.54 334 495.54 $ 12 171 952.81 $ 11 014 389.88 $ -1, 157,562.93 $ 546,374.00 $ 501,678.00 11123 900.81 494,157.06 $ 228,153.47 9 943 793.39 $ 12 171 952.81 $ 10,666,103.92 $ $ 0.00 $ 348,285.96 $ 52,216.94 273,524.53 1 180 107.42 1,505,848.89 348,285.96 427,450.71 141,196.45 24,011.71 -141,196.45 -721.24 -201.92 -334 495.54 $ 464 329.68 $ 5,622.15 32,737.92 32,706.28 8,960.45 124,628.64 194,674.24 65 000.00 $ ======46,..4=3=2=9.=68..., -1- EAST CENTRAL TECHNICAL COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET YEAR ENDED JUNE 30, 2008 Adult Literacy State Appropriation State General Funds Federal Funds Other Funds Total Adult Literacy Original Appropriation Final Budget Current Year Revenues Funds Available Com(!!red to Budget Prior Year Carry-Over Total Funds Available Variance Positive {Negative) $ 0.00 $ 237,510.00 $ 237,510.00 $ 0.00 246,864,00 242,864.00 0.00 62 000.00 13,822.50 $ 0.00 $ 546,374.00 $ 494196.50 $ 0.00 $ 0.00 0.00 0.00 $ 237,510.00 $ 242,864.00 13 822.50 494,196.50 $ 0.00 -4,000.00 -48 177.50 -52,177.50 Economic Development Other Funds $ 0.00 $ 501 678,00 $ 228153.47 $ 0.00 $ 228153.47 $ -273,524.53 Technical Education State Appropriation State General Funds Federal Funds Other Funds Total Technical Education $ 0.00 $ 6,701,050.00 $ 6,701,049.88 $ 0.00 $ 6,701,049.88 $ -0.12 0.00 964,491.02 779,943.69 0.00 779,943.69 -184,547.33 0.00 3,458 359.79 2,476,550.80 334 495.54 2,811,046.34 -647 313,45 $ 0.00 $ 11,123 900.81 $ 9 957 544.37 $ 334 495.54 $ 10.292 039.91 $ -831 860.90 Grand Totals - All Programs $ 0.00 $ 12,171,952.81 $ 10,679,894.34 $ 334,495.54 $ 11,014,389.88 $ -1,157,562.93 -2- EXHIBIT"B" Exeenditures Comeared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total Fund Balance $ 237,510.00 $ 242,824.56 13,822.50 $ 494,157.06 $ 0.00 $ 4,039.44 48177.50 52,216.94 $ 0.00 $ 39.44 0.00 39.44 $ 0.00 $ 1,340.37 0.00 1,340.37 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 $ 1,379.81 0.00 1,379.81 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 $ 1,379.81 0.00 1,379.81 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 1,379.81 0.00 1,379.81 $ 228153.47 $ 273 524.53 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 6,702,794.35 $ 778,546.23 2 462 452.81 $ 9 943,793.39 $ -1,744.35 $ 185,944.79 995 906.98 1 180107.42 $ 1,744.47 $ 1,397.46 348 593.53 348 246.52 $ 1,744.35 $ 9.05 20 917.94 22 671.34 $ 0.12 $ 0.00 $ 2,835.71 4,242.22 24196.18 393 707.65 27,032.01 $ 397,949.87 $ 0.00 $ 0.00 $ 0.00 4,242.22 0.00 393 707.65 0.00 $ 397 949.87 $ 0.00 $ 0.00 0.00 4,242.22 0.00 393,707.65 0.00 $ 397,949.87 $ 10,666,103.92 $ 1,505,848.89 $ 348,285.96 $ 24,011.71 $ 27,032.01 $ 399,329.68 $ 0.00 $ 399,329.68 $ 0.00 $ 399,329.68 Unexpendable Reserves Inventories 65 000.00 $ 464,329.68 -3-