Dekalb Technical College, Clarkston, Georgia, independent accountant's report on applying agreed-upon procedures for the fiscal year ended June 30, 2006

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
DEKALB TECHNICAL COLLEGE CLARKSTON, GEORGIA
INDEPENDENT ACCOUNTANTS REPORT ON APPLYING AGREED-UPON PROCEDURES
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Russell W. Hinton State Auditor

DEKALB TECHNICAL COLLEGE - TABLE OF CONTENTS -
INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES EXHIBIT
A BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 27, 2006

Members of the State Board Technical and Adult Education Members of the Local Board of Directors
and Honorable Robin Hoffman, President DeKalb 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'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 Budget Comparison and Surplus Analysis Report, which is attached as Exhibit A. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency ofthese procedures is solely the responsibility ofthe parties specified in this report. Consequently, we make no representation regarding the sufficiency ofthe 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.
Cash was not properly reconciled to amounts reported on the financial statements. A variance of $157,174.40 was noted between the reconciliations and the amounts reported on the annual financial statement worksheets.
Accounts payable was shown on the annual financial statements with a deficit balance of$1,521,000.31. Actual accounts payable should have been reported at $415,015.63, thus causing an understatement to accounts payable of

$1,936,015.94. A review of the subsidiary payables listing identified invalid payables of$-193,058.18. Additionally, an incorrect GAAP encumbrance entry reduced payables by $1,742,957.76.
Prepaid expenditures reported on the financial statements of $187,843.52 did not properly reconcile to the subsidiary listing totaling $190,243.52. This variance of $2,400.00 was due to a prior year adjustment made to current year revenue in error.
Inventories reported on the AFR of $560,562.92 did not reconcile to subsidiary detailed listing for inventories totaling $559,677.61 resulting in an unidentified variance of $885.31.
Capital Assets and Accumulated Depreciation, reported on the AFR, were not reconciled to the asset management module subsidiary ledger. Capital Assets on the Statement of Net Assets were overstated by $100,298.75.
Capital Leases liability, as reported on the Statement of Net Assets, did not agree with subsidiary capital lease payment schedules resulting in an understatement in liabilities of $223,614.96. Additionally, these liability amounts were not included in the calculation of Investment in Capital Assets, Net of Related Debt.
Invested in Capital Assets, Net of Related Debt, reported on the Statement of Net Assets, was overstated by $470,044.24.
Compensated Absences liability, totaling $1,133,726.65 on the Statement of Net Assets, did not reconcile to leave liability reports. Actual compensated absences liability should have been reported as $1,151,977.35 resulting in an understatement of liabilities of $18,250.70.
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 were unable to tie to the revenues reported on the DTAE confirmation. Per the confirmation DTAE revenues totaled $21,799,932.28 as opposed to $21,806,839.92 reported on the accounting records of the College, resulting in an unidentified variance of $6,907.64.
Revenue and expense activity was incorrectly reported on the SRECNA information submitted. Numerous errors related to GAAP entries were identified, resulting in material misstatements. See item number 4 for a detailed analysis of GAAP entries.

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.
The bank balances of $1,697,194.49, reported on the Cash note disclosure information, did not tie to the actual bank balances total of $1,597,194.49, resulting in a variance of $100,000.00.
Net accounts receivable of $1,408,916.74, as reported on the Accounts Receivable note disclosure information, did not tie to the net receivable of $1,234,520.06 reported on the Statement of Net Assets. This resulted in a variance of $174,396.68. Additionally, the State Appropriations receivable of $4,876.33 was erroneously included in the Other receivable category.
The Capital Assets note disclosure information was not properly reported and did not tie to the Statement of Net Assets. Beginning capital asset balances did not agree with either the prior year ending note balances of $10,137,231.68 or prior year ending AFR balances of$10,044,344.38. Current year additions did not include on-behalf capital gifts totaling $161,650.00. Ending Capital Assets, Net was reported as $9,865,394.25 in the note disclosure information; however, ending Capital Assets (Net) were reported on the Statement of Net Assets as $9,888,325.17, resulting in an improper variance of $22,930.92 in the financial statement note disclosure information.
The Long-Term Liabilities note disclosure for Lease Obligations was not properly reported. The following problems were identified:
Beginning balances for Lease Obligations reported in the note disclosure of $222,959.13 do not agree with prior year lease liability note ending amounts of $282,133.37 or prior year Statement of Net Assets current and noncurrent lease liability of $167,688.75. No determination could be made as to which amount was correct.
No current year activity was reported for either additions or reductions related to lease obligation activity.
Lease Obligations outstanding at year end were reported in the note disclosure as $222,959.13; however, the Statement of Net Assets reflects capital lease liability at $7,411.45. Supporting documentation provided for review, identified capital lease liability at June 30, 2006 of $231,026.41.
The Long-Term Liabilities note disclosure for Compensated Absences was not properly reported. The following problems were identified:

Beginning balances for Compensated Absences reported in the note disclosure of $1,258,668.72 did not agree with prior year lease liability note ending amounts of $1,259,251.02 or prior year Statement of Net Assets current and noncurrent compensated absence liability of $1,276,919.40. The amount reported on the prior year Statement of Net Assets is believed to be the correct beginning amount.
No current year additions were reported in the note. Current year reductions of $177,532.76 did not reconcile to supporting documentation provided for audit review. Supporting documentation identified earned leave additions of $845,829.20 and used leave reductions of $970,771.27.
Compensated Absences outstanding at year end were reported in the note disclosure as $1,081,135.96; however, the Statement of Net Assets reflects compensated absence liability of $1,133,726.65. Supporting documentation identified compensated absence liability at June 30, 2006 as $1,151,977.35.
Three programs totaling $265,565.97 were omitted from the Schedule of Expenditures of Federal Awards (SEFA) in error. Additionally, prior year grants crossing fiscal years were not included and no adjustments had been made for prior year or current year encumbrances for a net variance of $-233,084.51.
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.
The GAAP entry to adjust beginning net assets and record expenses for prior year encumbrances resulted in a material reduction in beginning net assets and overstatement of current year Federal revenue. Beginning net assets, as reported on SRECNA, are understated $11,258,819.83; Federal Nonoperating grant revenues are overstated $11,253,041.31; Operating Expenditures are overstated $880,094.29 and Accounts Payable are understated $874,315.77.
The GAAP entry to remove current year encumbrances resulted in a variance of $868,641.99 due to the adjustment being made using prior year encumbrances in error. This resulted in an understatement in Accounts Payable, as reported on the Statement of Net Assets, and Operating Expenditures, as reported on SRECNA, of $868,461.99.
No GAAP adjustment was made to defer revenues associated with current year encumbrances which resulted in an overstatement of $86,838.05 in Nonoperating Federal revenue and overstatement of $186,413.80 in Nonoperating Gifts revenue on the SRECNA. Likewise an understatement of $273,251.85 in deferred revenue on the Statement of Net Assets also resulted.

The GAAP adjustment made to remove deferred revenue from associated accounts receivables for accounts associated with current year encumbrances resulted in an overstatement of $58,875.11 in deferred revenue, an overstatement of $60,582.99 in Federal accounts receivable and an understatement of $1,707.88 in other accounts receivable as reported on the Statement of Net Assets.
A GAAP adjustment was made to record current year Pell and FSEOG activity in the amount of $1,894,853.00 to Operating Expenses - Scholarships and Grants and Federal Operating Grants and Contracts. This was incorrect because the Pell and FSEOG activity was already included in the preliminary column on the GAAP statement worksheet. Both Operating Expenses and Federal Operating Grants and Contracts are overstated on the SRECNA.
A GAAP adjustment was made to reclassify current year College Work-Study activity in the amount of $244,867.04. This entry was incorrect since the College Work-Study activity was already included on the SRECNA. Other Nonoperating revenue is understated and Federal Operating Grants and Contracts are overstated.
No GAAP entry was made to reclassify current year Pell, FSEOG and FCWS activity. This results in an understatement to Operating Revenues - Grants and Contracts - Federal and overstatement in Nonoperating Revenues- Grants and Contracts - Federal in the amount of $2,160,229.17. Operating Expenses Scholarships and Fellowships are understated by $1,803,304.61, Operating Revenues - Student Tuition and Fees are overstated by $234,491.04 and Nonoperating Expenses - Grants and Contracts - Expenses are overstated by $2,037,795.65.
The GAAP entry recording the prior year beginning allowance for doubtful accounts amount of $337,177.95 was incorrect. The amount recorded did not include Agency Fund activity and results in an understatement of Other Accounts Receivable - Allowance for Doubtful Accounts, reported on the Statement of Net Assets, and an overstatement of Beginning Net Assets, reported on SRECNA, in the amount of $13,949.63.
The GAAP entry to remove principal lease payments from current year expense activity and reclassify interest expense activity was incorrect. Current year principal payments of $82,174.94 were not removed from Operating Expenses Supplies and Other Services reported on SRECNA or from Capital Leases reported on the Statement of Net Assets. This results in an overstatement of operating expenses and capital lease liability in the amount of $82,174.94. Additionally the entry to reclassify interest expense of $18,202.54 should have been for $27,812.64. This results in Nonoperating Expenses - Interest Expense being understated by $9,610.10. Operating Expense - Supplies and Other Services are overstated in the same amount.

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 2006. 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 of salaries, travel, and per diem and fees 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 Budget Comparison and Surplus Analysis Report (Exhibit A). Confirm that budget information presented in this Report supports activity reported in the College's accounting records and determine if any budget overexpenditures exist.
The College's budget comparison reflected an overexpenditure of$404,708.91 in the Economic Development category.
In the Fund Balance Adjustments section of Exhibit A, there is a line item "Other Additions" in the amount of $-116,310.19. During a review of budget worksheets prepared by the College, the auditor identified an adjusting entry to the Budget statements to reclassify $116,310.19 out of the Unidentified-Must be Reclassified account into this "Other Additions" category. This journal entry could not be substantiated by supporting documentation.
9. Obtain documentation for Budget basis reserves reported by the College on the Budget Comparison and Surplus Analysis Report (Exhibit A). Confirm that the reserves are properly documented, valid and appropriate.
We did not note any exceptions as a result of our procedures.
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.

The College's H.O.P.E. Scholarship Program reconciliation did not reconcile to the College's accounting records as follows:

Report Item

Per Hope Reconciliation

Per Accounting Records

Unreconciled Difference

Cash disbursed

to school

$5,494,119.13

$5,494,122.31

$

3.18

Amount Awarded

to Students

$5,019,659.38

$5,019,269.53

$ 389.85

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.

Respectfully submitted,
~~~
Ru sell W. Hinton, CPA, CGFM State Auditor

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EXHIBIT

DEKALB TECHNICAL COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
YEAR ENDED JUNE 30, 2006

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
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenue Refund to Grantors
Federal Financial Assistance Returned to Georgia Department of Technical and Adult Education
Prior Year Reserved Fund Balance Included in Funds Available Other
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Reserved Federal Financial Assistance Live Works Projects Prior Year Local Funds Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 17,982,805.57 $ 17,982,805.57 $

4,131,827.62

3,478,710.87

10,074,517.99

8,888,355.68

$ 32,189,151.18 $ 30,349,872.12 $

0.00 -653, 116.75 -1 186 162.31
-1,839,279.06

0.00

75 509.84

$ 32,189,151.18 $ 30,425,381.96 $

75 509.84 -1,763,769.22

$ 2,406,421.96 $ 2,390,233.34 $

517,955.00

922,663.91

29,264,774.22

26,784,086.89

$ 32,189,151.18 $ 30,096,984.14 $

$

0.00 $

328,397.82 $

16,188.62 -404,708.91 2,480,687.33
2,092,167.04
328,397.82

846,261.70

110,217.06 -115,217.03
-85,659.02 -75,509.84 -116 310.19

$

892,180.50

$

70,173.03

79,235.93

11,401.58

121,125.44

6,334.58

337,177.95

266 010.73

$

891,459.24

721.26

$

892,180.50