Dekalb Technical College, Clarkston, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
DEKALB TECHNICAL COLLEGE CLARKSTON, GEORGIA
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Russell W. Hinton State Auditor

DEKALB TECHNICAL COLLEGE - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

5

D NOTES TO THE FINANCIAL STATEMENTS

6

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

20

2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

21

3 RECONCILIATION OF SALARIES AND TRAVEL

23

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

SECTION I FINANCIAL

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
January 10, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Board of Technical and Adult Education Members of the Local Board of Directors
and Honorable Robin Hoffman, President DeKalb Technical College
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We were engaged to audit the accompanying basic financial statements (Exhibits A through D) of DeKalb Technical College, an organizational unit of the State of Georgia. These financial statements are the responsibility of the Technical College's management. Our responsibility is to express an opinion on these financial statements based on our audit.
DeKalb Technical College did not provide adequate supporting documentation or authorization for employee compensation nor, in our opinion, is the system of internal control adequate to provide safeguards of assets and assume proper recording of salary transactions. Accordingly, it was impracticable to extend our procedures sufficiently to determine the extent to which the financial statements might have been affected by these conditions.
The Technical College was unable to perform a reconciliation between its' capital asset records and the amount reported on the financial statements. The Technical College's June 30, 2007 financial statements reported capital assets at $8,924,640.64. Additionally, the Technical College's records did not provide sufficient information for the application of other auditing procedures to ascertain whether amounts reported for capital assets are fairly stated.
Because the Technical College was unable to perform reconciliation procedures for capital assets and did not provide appropriate supporting information for employee compensation reported in the financial statements, and because we were unable to apply other auditing procedures to satisfy ourselves as to the accuracy of the balances reported, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the basic financial statements.
07ARL-65X

As discussed in Note 1, the financial statements ofDeKalb Technical College are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of DeKalb Technical College. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State ofGeorgia, in conformity with accounting principles generally accepted in the United States of America.
DeKalb Technical College has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not to be part of, the basic financial statements.
The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part ofthe basic financial statements ofDeKalb Technical College. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this supplementary information. However, we did not audit this information, and express no opinion on it.
Respectfully submitted,
.m. Q p , ----"'~'-
~l~ell W. Hinton, CPA, CGFM State Auditor
RWH:as 07ARL-65X

BASIC FINANCIAL STATEMENTS - 1-

DEKALB TECHNICAL COLLEGE STATEMENT OF NET ASSETS
JUNE 30, 2007
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net Federal Financial Assistance Other Prepaid Items Inventories
Total Current Assets
Noncurrent Assets Capital Assets, Net
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deferred Revenue Funds Held for Others Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Unrestricted
Total Net Assets

EXHIBIT"A"

$ 1,457,390.76 204,977.14 743,502.02 192,665.94 456,536.69
$ 3,055,072.55
8,924,640.64
$ 11,979,713.19

$

705,379.23

154,359.98

12,209.10

590,924.17

782,157.12

$ 2,245,029.60

599,545.04 $ 2,844,574.64

$ 8,924,640.64 210 497.91

$ ==9=1,=35='=13=8=.5=5

The notes to the financial statements are an integral part of this statement. -2-

DEKALB TECHNICAL COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2007

EXHIBIT"B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal
Sales and Services Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES {EXPENSES)
State Appropriations Grants and Contracts
Federal Local Expenses Gifts Interest and Other Investment Income Other Nonoperating Expenses
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Loss
Capital Grants and Gifts Loss on Disposal of Capital Assets
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

$ 7,642,322.02 -301,576.03
2,190,333.64 755,023.13 8 457.40
$ 10,294,560.16

$ 16,880,352.66 4,042,474.97 131,840.46 1,735,652.61 1,093,707.75 7,468,636.56 923,686.00
$ 32,276,351.01
$ -21,981,790.85

$ 17,606,836.95

3,383,425.60 4,274, 114.07 -4,320, 138.93
208,847.69 46,543.55
-500.00

$ 21,199,128.93

$

-782,661.92

-385,355.06 $ -1, 168,016.98
10,303,155.53

$ 9,135,138.55

The notes to the financial statements are an integral part of this statement. -3-

(This page left intentionally blank)

DEKALB TECHNICAL COLLEGE STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services Payments to Scholarships and Fellowships Payments to Suppliers Payments to Employees Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets
CASH FLOWS FROM INVESTING ACTIVITIES Earnings on Investments
Net Increase/Decrease in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Expense Change in Assets and Liabilities: Receivable, Net Inventories Prepaid Items Accounts Payable Salaries Payable Deferred Revenue Capital Leases Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
The notes to the financial statements are an integral part of this statement.
-5-

EXHIBIT"C"

$ 7,251,416.07 2,131,514.05 763,722.37 -1, 735,652.61
-12, 148,450.22 -16,638,130.02
8457.40
$ -20,367, 122.96

$ 17,611,713.28 4,563.14
3,758,217.14 -500.00
$ 21,373,993.56

$

-178 484.10

$

46 543.55

$

874,930.05

582,460.71

$ -21,981,790.85
923,686.00 -46,009.58 104,026.23
-4,822.42 483,421.78
2,060.51 -93,440.69
5,583.93 240,162.13
$ ======-2=4=0=0.=64=

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY DeKalb Technical College is one of thirty-four (34) State supported member colleges of postsecondary education in Georgia which comprise the Georgia Department ofTechnical and Adult Education, an organizational unit ofthe State of Georgia. The accompanying financial statements reflect the operations of DeKalb Technical College as a separate reporting entity.
The Technical College's Local Board of Directors is composed of eleven (11) members serving staggered three-year terms who are appointed by the State Board ofTechnical and Adult Education. Appropriation of State funds is made to the Georgia Department ofTechnical and Adult Education by the General Assembly ofGeorgia. The Department's Administrative Central Office determines the amount of State appropriations to be received by DeKalb Technical College. The Technical College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, DeKalb Technical College is considered an organizational unit of the Georgia Department ofTechnical and Adult Education for financial reporting purposes because of the significance ofits legal, operational, and financial relationships as defined in Section 2100 ofthe Governmental Accounting Standards Board (GASB) Codification ofGovernmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt organizations whose activities primarily support member colleges of postsecondary education in Georgia which comprise the Georgia Department ofTechnical and Adult Education (an organizational unit ofthe State ofGeorgia), are considered potential component units of the State. See Note 14 for additional information.
FINANCIAL STATEMENT PRESENTATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective ofthe Technical College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.
GAAP requires that the reporting of summer school revenues and expenses be split between fiscal years rather than in one fiscal year. Due to lack of materiality, the Technical Colleges of the Georgia Department ofTechnical and Adult Education will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
BASIS OF ACCOUNTING For financial reporting purposes, the Technical College is considered a special-purpose government engaged only in business-type activities. Accordingly, the Technical College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
-6-

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The Technical College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Technical College has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool.
ACCOUNTS RECEIVABLE Accounts receivable consist oftuition and fee charges to students, allotments due from the Georgia Department ofTechnical and Adult Education - Administrative Central Office, reimbursements due from Federal, State, local, and private grants and contracts, and other receivables disclosed from information available. Accounts receivable are recorded net of estimated uncollectible amounts.
INVENTORIES Resale inventories are valued at cost using the consumption method.
CAPITAL ASSETS Capital assets are recorded at cost at date of acquisition, or fair market value at the date of capital contribution. The Technical College capitalizes all land and land improvements. For equipment, the Technical College's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Buildings and Building Improvements, Improvements Other Than Buildings and Library Collections that exceed $100,000.00 or significantly increase the value or extend the useful life of the asset are capitalized. For infrastructure, the Technical College's capitalization threshold is $1,000,000.00. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives ofthe assets, generally 10 to 40 years for buildings, 15 to 25 years for infrastructure, 15 years for improvements other than buildings, 10 years for library books, and 3 to 10 years for equipment.
To fully portray capital assets acquired by the Technical Colleges of the Georgia Department of Technical and Adult Education, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to both the Technical College and the Georgia Department of Technical and Adult Education. The GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution ofthe State of Georgia and the Act creating the GSFIC. The bonds are issued for the purpose of acquiring capital assets and this debt constitutes direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.

-7-

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS For major construction projects, GSFIC records construction in progress on its books throughout the construction period and at project completion transfers the entire project costs to DeKalb Technical College to be recorded as an asset on the Technical College's books. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to DeKalb Technical College.
DEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and other activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
COMPENSATED ABSENCES Employee vacation pay is accrued for financial statement purposes when vested. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. DeKalb Technical College had an accrued liability for compensated absences in the amount of $1,141,540.03 as of July 1, 2006. For fiscal year 2007, $1,050,382.43 was earned in compensated absences and employees were paid $810,220.30, for a net increase of $240,162.13. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $1,381,702.16.
NONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; and (2) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
NET ASSETS The Technical College's net assets are classified as follows:
Invested in capital assets, net ofrelated debt: This amount represents the Technical College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. (The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.)

-8-

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS Unrestricted net assets: Unrestricted net assets represent available resources derived from student tuition and fees, state appropriations, and sales and services of educational departments. These resources will be used for transactions relating to the educational and general operations of the Technical College, and may be used at the discretion of the governing board to meet subsequent fiscal year expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Department of Technical and Adult Education for remittance to the Office ofTreasury and Fiscal Services. At June 30, 2007, there was no surplus to be refunded.
When an expense is incurred that can be paid using either restricted or unrestricted resources, the Technical College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
INCOME TAXES DeKalb Technical College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
CLASSIFICATION OF REVENUES The Technical College has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics ofexchange transactions, such as (1) student tuition and fees, net ofscholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary FundAccounting, and GASB No. 34, such as state appropriations and investment income.
SCHOLARSIDP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Technical College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the Technical College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Technical College has recorded contra revenue for scholarship allowances.
-9-

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 2: DEPOSITS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Technical College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Technical College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu ofa surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds ofany public authority created by the laws ofthe State ofGeorgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation ofthe United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
6. Guarantee or insurance ofaccounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies, which allows agencies of the State of Georgia (and thus DeKalb Technical College), the option of exempting demand deposits from the collateral requirements.
At June 30, 2007, DeKalb Technical College's bank balance was $2,169,867.54. Of this balance $2,169,867.54 was collateralized with securities held by the financial institution, its' trust department or agent, but not in the Technical College's name.

- 10-

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2007, consists of the following:

Student Tuition and Fees Federal, State and Private Funds Other

$ 545,516.14 204,977.14 606,618.96

$ 1,357,112.24

Less: Allowance for Doubtful Accounts

408,633.08

Net Accounts Receivable

$ 948,479.16

NOTE 4: INVENTORIES

Inventories at June 30, 2007, consists ofthe following:

Bookstore

$ 456,536.69

NOTE 5: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2007:

Balance July l, 2006

Additions

Reductions

Balance June 30, 2007

Capital Assets, Not Being Depreciated:

Land and Land Improvements

$ 1,205,855.00 $

0.00 $

0.00 $ 1,205,855.00

Capital Assets, Being Depreciated: Building and Building Improvements $ Improvements Other Than Buildings Capital Leases Equipment Library Collections

9,359,307.00 $ 1,030,310.00
221,508.04 6,814,052.62
304,994.49

65,363.00
$ 45,386.00 70,135.74

$
221,508.04 962,486.13
13,225.63

9,424,670.00 1,030,310.00
0.00 5,896,952.49
361,904.60

$ 17,730,172.15 $ 180,884.74 $ 1,197,219.80 $ 16,713,837.09

Less: Accumulated Depreciation: Building and Building Improvements $ Improvements Other Than Buildings Capital Leases Equipment Library Collections

2,540,667.10 $ 1,030,310.00
59,661.19 4,942,752.97
147,992.08

210,895.66
$ 676,302.86
36,487.48

$
59,661.19 588,574.59
1,782.11

2,751,562.76 1,030,310.00
0.00 5,030,481.24
182,697.45

$ 8,721,383.34 $ 923,686.00 $ 650,017.89 $ 8,995,051.45

Total Capital Assets, Being Depreciated,

Net

$ 9,008,788.81 $ -742,801.26 $ 547,201.91 $ 7,718,785.64

Capital Assets, Net

$ IQ 214,643.81 $ -142,801.26 $ 541201.21 $ 8 224 640.64

- 11 -

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 6: DEFERRED REVENUE

Deferred revenue at June 30, 2007, consists of the following:

Prepaid Tuition and Fees Federal Grants and Contracts

$ 12,209.00 0.10

Totals NOTE 7: LONG-TERM LIABILITIES

$======1==2-=20==9==l.==O

Long-Term liability activity for the year ended June 30, 2007, was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences
Total Long-Term Liabilities

Balance Jul:t 1, 2006

Additions

Reductions

Balance June 30, 2007

$ 156,262.92

$ 156,262.92 $

0.00 $

1,141,540.03 $ 1,050,382.43 $ 1.297,802 95 $ l 050.382.43 $

810,220.30

1,381,702.16

966,483.22 $ 1,381.702 16 $

Current Portion
0.00
782,157.12 782 157 12

NOTE 8: LEASE OBLIGATIONS

OPERATING LEASES
DeKalb Technical College has entered into certain agreements to lease office space and equipment which are classified as operating leases (leases on assets not recorded on the balance sheet). These leases generally contain provisions that, at the expiration date of the original term ofthe lease, the Technical College has the option of renewing the lease on a year-to-year basis. Amounts are included only for multi-year leases and for cancellable leases for which an option to renew for the subsequent fiscal year has been exercised.

Expenses for rental ofoffice space and equipment under operating leases for the year ended June 30, 2007, totaled $1,223,546.37.

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description
DeKalb Technical College participates in the Teachers Retirement System ofGeorgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State ofGeorgia. TRS provides service retirement, disability retirement, and survivor's benefits for

- 12 -

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description
its members in accordance with State statute. The Teachers Retirement System ofGeorgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy
Employees ofDeKalb Technical College who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. DeKalb Technical College makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 958,416.17 $ 989,304.19 $ 1,033,212.97

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description
DeKalb Technical College participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose ofproviding retirement allowances for employees ofthe State of Georgia.

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description
The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.

- 13 -

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description Under both the old plan and new plan, members become vested after 10 years ofcreditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.
Retirement benefits paid to members are based upon a formula which considers the monthly average ofthe member's highest twenty-four consecutive calendar months ofsalary, the number ofyears of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution ofthe member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board ofTrustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 ofthe Internal Revenue Code (IRC) as a portion ofERS. The purpose ofSRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members ofother state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Technical College's payroll for the year ended June 30, 2007, for employees covered by ERS was $2,628,062.95. The Technical College's total payroll for all employees was $16,880,352.66.
Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the Technical College pays the remainder on behalfofthe employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The Technical College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2007, the ERS employer contribution rate for the Technical College amounted to 10.16% ofcovered payroll and included the amounts contributed on behalfof the employee under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.

- 14 -

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Policy Total contributions to the plan made during fiscal year 2007 amounted to $299,782.68, of which $266,931.49 was made by the Technical College and $32,851.19 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2007, financial report which may be obtained through ERS.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description DeKalb Technical College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly ofGeorgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members ofa public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. Ifa member has less than $3,500.00 credited to his/her account, the Board ofTrustees has the option ofrequiring a lump sum distribution to the member in lieu ofmaking periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
The Employees' Retirement System ofGeorgia issues a financial report each fiscal year which may be obtained through ERS.
Contributions and Vesting Member contributions are seven and one-halfpercent (7.5%) ofgross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. The Technical College's payroll for the year ended June 30, 2007, for employees covered by GDCP was $2,889,008.74. The Technical College's total payroll for all employees was $16,880,352.66.
Total contributions made by employees during fiscal year 2007 amounted to $216,677.93 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
- 15 -

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT"D"

NOTE 10: RISK MANAGEMENT
Public Entity Risk Pool The Department of Community Health administers for the State of Georgia a program of health benefits for the employees of units of government of the State of Georgia, units of county governments, and local education agencies located with the State ofGeorgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units ofgovernment participating in the plan, and appropriations made by the General Assembly of Georgia. The Department ofCommunity Health contracted with United Healthcare to process medical claims and Express Scripts, Incorporated to process prescription drug claims in accordance with the State Employees' Health Benefit Plan as established by the Department of Community Health.
Other Risk Management The Department ofAdministrative Services (DOAS) has the responsibility for the State ofGeorgia ofmaking and carrying out decisions that will minimize the adverse effects ofaccidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Technical College, as an organizational unit of the Georgia Department of Technical and Adult Education, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
NOTE 11: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenses which are disallowed under grant terms. The amount of expenses which may be disallowed by the grantor cannot be determined at this time although DeKalb Technical College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against DeKalb Technical College (an organizational unit of the Department of Technical and Adult Education), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State ofGeorgia are disclosed in the State ofGeorgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007.

- 16 -

DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2007

EXHIBIT "D"

NOTE 12: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS
The Technical College's operating expenses shown at the natural classification on the "Statement of Revenues, Expenses and Changes in Net Assets" are all classified as Instruction at the functional classification.
NOTE 13: AFFILIATED ORGANIZATIONS
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment ofGASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, DeKalb Technical Foundation, Inc. has been determined to be a legally separate, tax exempt organization whose activities primarily support DeKalb Technical College, a member college ofpostsecondary education in Georgia whose units comprise the Department ofTechnical and Adult Education (an organizational unit ofthe State of Georgia). The State Accounting Office has determined Component Units ofthe State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, DeKalb Technical College has not included financial activity for DeKalb Technical Foundation, Inc. in these financial statements.

- 17 -

(This page left intentionally blank)

SUPPLEMENTARY INFORMATION - 19 -

DEKALB TECHNICAL COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2007
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Salaries Payable Accounts Payable Deferred Revenue Funds Held for Others
Total Liabilities
Fund Balances Reserved Federal Financial Assistance Live Works Projects Prior Year Local Funds Continuing Education Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

963,345.03

160,881.22 1,307,003.58
192,665.94 456,536.69

$ ======3,=0=80=,4=3=2=.4=6

$

137,166.61

1,598,839.39

11,772.97

48,828.15

$ 1,796,607.12

$

218,837.03

100,026.22

6,571.19

34,933.87

96,614.10

155,130.71

335,034.44

336,677.78

$ 1,283,825.34

$ ==3=,0=8=0'=43=2=.4=6

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
-20-

DEKALB TECHNICAL COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

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 Prior Year Receivables/Revenue Unreserved Fund Balance (Surplus) Returned
to Department of Technical and Adult Education Year Ended June 30, 2006
Refunds to Grantors Federal Financial Assistance Returned to Georgia Department of Technical and Adult Education
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 17,607,558.21 $ 17,607,558.21 $

4,078,957.69

3,617,578.17

11,063,429.85

8,576,978.14

$ 32,749,945.75 $ 29,802,114.52 $

0.00 -461,379.52 -2 486 451.71
-2,947,831.23

0.00

249,758.52

$ 32,749,945.75 $ 30,051,873.04 $

249 758.52 -2,698,072.71

$ 2,402,993.62 $ 2,337,238.45 $

1,910,895.85

1,216,897.10

28,436,056.28

25,834,941.74

$ 32,749,945.75 $ 29,389,077.29 $

$

0.00 $ 662,795.75 $

65,755.17 693,998.75 2 601 114.54
3,360,868.46
662 795.75

891,459.24 721.26

21,716.05 -3,875.14
-721.26
-38,512.04 -249,758.52 $ 1,283,825.34

SUMMARY OF FUND BALANCE
Reserved Federal Financial Assistance Live Works Projects Prior Year Local Funds Continuing Education Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories

$ 218,837.03 100,026.22 6,571.19 34,933.87 96,614.10 155,130.71 335,034.44 336,677.78

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 21 -

$ 1,283,825.34

(This page left intentionally blank)

DEKALB TECHNICAL COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

Totals per Annual Supplement
Accruals June 30, 2007 June 30, 2006
Compensated Absences June 30, 2007 June 30, 2006
Lag Salaries June 30, 2007 June 30, 2006
Unidentified Variance

SALARIES

TRAVEL

$ 16,825,480.34 $

131,840.46

154,359.98 -152,299.47

1,169,318.79 -1, 125,224.28

-144, 100.48 160,071.55
-7 253.77

$ 16,880,352.66 $ ===1=31=,8=4=0=.4=6

- 23 -

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

DEKALB TECHNICAL COLLEGE AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-830-04-01 FS-830-05-01 FS-830-05-02 FS-830-05-03

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

GENERAL LEDGER Failure to Correctly Prepare Financial Statements Finding Control Number: FS-830-05-01

For fiscal year 2006 there were 31 incorrect GAAP related items noted in the Agreed Upon Procedures Report related to journal entries as well as the Statement ofNet Assets and the Statement of Revenues, Expenses and Changes in Net Assets. For fiscal year 2007, DeKalb Technical College did not remove agency funds in converting the statements, and included the revenue and expense in nonoperating activity. DeKalb Technical College will continue to work to ensure the required year-end manipulation of the financial statements in order to convert to GAAP statements are completed for the purpose of the State Accounting Office producing a state-wide Consolidated Annual Financial Report (CAFR) is perfected.

GENERAL LEDGER Deficiencies in Maintaining Account Balances Finding Control Number: FS-830-05-02

The fiscal year 2005 Management Report noted incorrectly reported balances in the following accounts: 160001 Advances to Other Funds, 171001 Buildings, 200050 Deferred Revenue, 262001 Funds Held for Others, 296001 Clearing Accounting, 125010 Accounts Receivable Banner, and 337080 DTAE Fund Equity. For fiscal year2007 all of these accounts had the correct balances and activity with the exception of 262001. For fiscal year 2007, DeKalb Technical College incorrectly recorded all revenue and expenses in 262001 instead ofusing identifiable revenue and expense accounts. While the 262001 ending balance was correct, the incorrect use of the account during the year prohibited actual revenue and expense accounts to be detailed and identified related to trust and agency funds. DeKalb Technical College also incorrectly used 627049 Other Operating Expense in the recording of food purchases, certain per diem and travel and consultant fees. DeKalb Technical College has instituted monthly balancing and review procedures to be overseen by the VP Administrative Services to ensure the proper General Ledger and other account balances are maintained correctly.

- 1-

DEKALB TECHNICAL COLLEGE AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Finding Control Number: FS-830-05-03

As ofthe close of fiscal year 2007 this issue was unresolved, except that all reconciliation items were identified and no items were listed only as "unreconciled". All items prior to fiscal year 2007 have been reconciled as of October 2007 (fiscal year 2008). All fiscal year 2007 items will be reconciled as ofDecember 2007. All bank reconciliations are now reviewed by the VP Administrative Services and all prior month reconciliation items will be corrected before the close ofthe following monthly accounting period.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-830-05-01

Previously Reported Corrective Action Implemented

-2-

SECTION III FINDINGS AND QUESTIONED COSTS

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate Internal Control/Risk Assessments Material Weakness Finding Control Number: FS-830-07-01

Condition:

The Technical College was unable to provide sufficient evidence that management had adequately accessed and documented the Technical College's system of internal controls including the design, implementation and monitoring of internal controls.

Criteria:

The State Accounting Office's Accounting Procedures Manual for the State of Georgia, Section V, Pages 5-1-1 and 5-1-2 state in part, "Each State organization is responsible for adopting an internal control framework that is suitable for the type ofservices they provide.... Each State organization has a responsibility to assess their internal control system and use this information to design, implement, and monitor internal controls that are suitable for their organization".

Questioned Cost: NIA

Information:

Our examination and testing for the year under review revealed the following deficiencies:

1) The Technical College could not provide sufficient documentation to support policies and procedures established by management.
2) The Technical College could not provide evidence that management had formally identified, evaluated and prioritized risks that affect the Technical College.
3) The Technical College could not provide evidence that management had taken action related to identified risks oftheir organization and determined the necessary action to reduce the potential occurrence and significance.
4) The Technical College could not provide evidence that management monitored conditions to remain aware ofchanging circumstances to ensure that systems or processes were accurately capturing, processing and reporting data.

Cause:

The Technical College's management failed to design, implement and monitor satisfactory internal controls to provide reasonable assurance that the following entity objectives are being met: (1) effective and efficient operations, (2) reliability of financial reporting, (3) compliance with applicable laws and regulations, and (4) safeguarding of assets.

- 1-

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate Internal Control/Risk Assessments Material Weakness Finding Control Number: FS-830-07-01

Effect:

Without satisfactory accounting controls and procedures in place, the Technical College could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact the reporting ofits financial position and results ofoperations.

Recommendation:

The Technical College should review its internal controls. It should ensure that these policies and procedures are adequate and should then determine whether or not they are properly documented, placed in operation and operating effectively. In areas where deficiencies exist, the Technical College should design and implement additional control procedures to provide reasonable assurance that the controls provide (1) effective and efficient operations, (2) reliable financial reporting, (3) compliance with applicable laws and regulations, and (4) safeguarding of assets.

CASH AND CASH EQUIVALENTS Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-830-07-02

Condition:

The accounting procedures of the Technical College were insufficient to provide for adequate internal controls over cash and cash equivalents. This deficiency was previously reported in finding FS-830-05-03 from fiscal year ended June 30, 2005.

Criteria:

An adequate system of internal controls dictate that bank reconciliations be performed on a monthly basis, and include the following: (1) adequate supporting documentation, (2) reconciling items correctly identified by description, (3) adjustments which are needed are identified and made in a timely manner, and (4) evidence of an effective supervisory review and approval function.

Questioned Cost: NIA

-2-

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-830-07-02

Information:

A review ofthe bank reconciliations for the Operating account revealed the following:

1) The Technical College failed to post receipts and disbursements in a timely manner to the financial records for items that had cleared the bank. Reconciling items were carried on the bank reconciliation for an unreasonable amount oftime. At June 30, 2007, over 56 different items totaling $231,091.37 (net) had not been posted to the general ledger. These items included unrecorded deposits dating back to February 2006, numerous unrecorded wire transfers, deposits recorded twice, voided checks, interest earned, etc.

2) The Technical College failed to adequately review and maintain an outstanding check listing. Outstanding checks were included on the bank reconciliation dating back to August 1998. In some instances the outstanding check list included items that could not be identified by check number, date issued and amount for checks issued prior to December 2005. Additionally, there was no evidence that unclaimed property procedures had been performed related to these outstanding checks.

Cause:

The Technical College's management failed to implement satisfactory controls to ensure that bank reconciliations were performed on a monthly basis and reconciling items were properly identified and corrected within a reasonable amount of time.

Effect:

Without satisfactory accounting controls and procedures in place, the Technical College could place itself in a position where potential misappropriation of assets could occur. The lack of controls could impact reporting of its financial position. In addition, the Technical College was noncompliant with provisions of the "Disposition of Unclaimed Property" Act.

-3-

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-830-07-02

Recommendation:

Management should monitor accounting controls and procedures currently in place, identify weaknesses and implement procedures to strengthen the internal controls over the bank reconciliation process. The Technical College should prepare an accurate outstanding check list, including check dates, for each account and review the lists periodically on a timely basis. In addition, the Technical College should also ensure that proper procedures are implemented to follow the "Disposition ofUnclaimed Property" Act (OCGA 44-12-190 through 44-12-235) which requires that unclaimed property be reported and remitted to Georgia Department ofRevenue on an annual basis after a defined holding period has expired.

EMPLOYEE COMPENSATION Inadequate Internal Controls Material Weakness Finding Control Number: FS-830-07-03

Condition:

The accounting procedures ofDeKalb Technical College were insufficient to provide for adequate internal controls over employee compensation.

Criteria:

The Technical College's management is responsible for designing and implementing internal controls that provide reasonable assurance that employees are properly compensated and that supporting documentation related to employee compensation is maintained, processed and reported within its accounting records. The Department of Technical and Adult Education's policy and procedures manual states, "The President ofTechnical Colleges shall determine the salary to be paid to each employee and approve all personnel actions (employment, promotions, disciplinary actions, dismissals, etc)."

Questioned Cost: NIA

-4-

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Internal Controls Material Weakness Finding Control Number: FS-830-07-03

Information:

Test of controls of 25 personnel files revealed the following deficiencies:

1) 16 instances of unapproved personnel actions 2) 5 unapproved adjunct employee pay amounts 3) 1 personnel action form approved after the employee was paid 4) 7 instances where the earnings paid did not agree to the personnel
action form

Cause:

These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning related to employee compensation.

Effect:

Without satisfactory controls and procedures in place, the Technical College could place itself in a position where potential misappropriation of assets could occur. Additionally, due to the condition of the employee compensation supporting documentation the auditors were unable to determine ifsalary transactions were properly recorded within the accounting records.

Recommendation:

Management should establish policies and procedures to ensure that all employee compensation is approved, properly calculated, well documented, and reported accurately.

GENERAL LEDGER Failure to Correctly Maintain Agency Funds Significant Deficiency Finding Control Number: FS-830-07-04

Condition:

The accounting procedures of the Technical College were insufficient to provide adequate controls over general ledger account balances related to Agency Funds.

Criteria:

The Technical College's management is responsible for designing and maintaining internal controls that provide reasonable assurance that receipts and disbursements are properly documented, processed and reported within its accounting records.

-5-

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER Failure to Correctly Maintain Agency Funds Significant Deficiency Finding Control Number: FS-830-07-04

Questioned Cost: NIA

Information:

The following weaknesses/deficiencies relating to agency funds were noted:

1) The Technical College is not adequately reconciling their Agency Funds for the PELL, FSEOG, and HOPE Grants.
2) Balances remain on numerous Grants dating back to 1997 containing both positive and negative fund balance amounts.

Cause:

These deficiencies were the result of management's failure to properly monitor, reconcile, and maintain the Agency Funds.

Effect:

Without satisfactory controls in place, potential errors in the financial statements and reporting to grantors could occur.

Recommendation:

Management should implement policies and procedures to ensure Agency Funds are reconciled monthly and that uncorrected items are identified and corrected in a timely manner.

CAPITAL ASSETS Inadequate Control over Capital Assets Material Weakness Finding Control Number: FS-830-07-05

Condition:

The Technical College failed to maintain accurate capital asset records.

Criteria:

The State Accounting Office's Accounting Procedures Manual for the State ofGeorgia states that, "assets purchased, constructed or donated that meet or exceed the State's established capitalization thresholds or minimum reporting requirements must be uniformly classified in conformity with the Accounting Procedures Manual".

-6-

DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Inadequate Control over Capital Assets Material Weakness Finding Control Number: FS-830-07-05

Questioned Cost: NIA

Information:

The following weaknesses/deficiencies were noted relating to Capital Assets:

The Technical College did not perform a complete physical inventory count ofcapitalized equipment. The last known physical inventory count was performed in fiscal year 2002.
Additions to capital assets were not being reconciled to capital outlay expense recorded in the general ledger.

Cause:

The Technical College's management failed to implement appropriate internal controls and procedures necessary to properly record, maintain and track capital assets.

Effect:

Without satisfactory accounting controls and procedures in place, the Technical College could place itself in a position where potential misappropriation of assets could occur. The lack of controls could impact reporting of its financial position and results of operations.

Recommendation:

The Technical College should perform a complete physical inventory of all capital assets. In addition, the Technical College should implement procedures to reconcile current year capital asset additions to current year capital outlay expense on a periodic basis. Finally, the Technical College should establish appropriate procedures and controls to ensure that capital asset records are correctly maintained.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

-7-