JA A~OO RI Vb f'5 /111 ~'1g MANAGEMENT REPORT PICKENS TECHNICAL INSTITUTE JASPER, GEORGIA AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 1998 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS 254 WASHINGTON STREET ATLANTA, GEORGIA 30334-8400 PICKENS TECHNICAL INSTITUTE MANAGEMENT REPORT - TABLE OF CONTENTS - LETTER OF TRANSMITTAL SECTION I SELECTED FINANCIAL INFORMATION EXIllBITS A ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND 1 SCHEDULES OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND B "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION 2 C "B" LOTTERY FOR EDUCATION 3 D RECONCILIATION OF SALARIES AND TRAVEL 4 SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTIONID ~ .. CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS CLAUDE L. VICKERS STATE AUDITOR (404) 6562174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400 September 24, 1998 Honorable Zell Miller, Governor Members of the General Assembly of Georgia Members of the State Board of Technical and Adult Education Members ofthe Local Board of Directors and Honorable Nancy G. Proffitt, President Pickens Technical Institute Ladies and Gentlemen: As part of our audit of the statutory basis financial statements of the 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 ofand for the year ended June 30, 1998, we have performed certain audit procedures at Pickens Technical Institute. Accordingly, the fmancial statements and compliance activities of Pickens Technical Institute were examined to the extent considered necessary in order to express an 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 fmancial and compliance activities of Pickens Technical Institute as of and for the year ended June 30, 1998. The particular information provided is enumerated in the Table of Contents. This report is intended solely for the use of management of Pickens Technical Institute. However, this report is a matter of public record and its distribution is not limited. CLV:ds Claude L. Vickers State Auditor SECTION I SELECTED FINANCIAL INFORMATION ~ .. PICKENS TECHNICAL INSTITUTE ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND YEAR ENDED JUNE 30, 1998 EXHIBIT "A" SUMMARY OF FUND BALANCE "- .. Reserved Federal Financial Assistance For Refund to Georgia Department of Technical and Adult Education - Administrative Central Office $ 55,760,98 $ 55,760,98 For Expired Grant Balances 82.56 82.56 For Other 4,202.44 4,202.44 Live Work Projects 27,071.64 27,071.64 Prior Year Local Funds 35,571.11 35,571.11 Private Grants Surplus 2,041.08 68,478.25 $ _ _-,3:.<..,1.:..=9~1:..='O..=..O 2,041.08 71,669.25 $=====1=93;;,;,2;;;;0=8=,0=.,,6 $ 3,191.00 $ 196,399.06 - 1- PICKENS TECHNICAL INSTITUTE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30, 1998 EXHIBIT"B" FUNDS AVAILABLE REVENUES State Appropriations Federal Revenues Other Revenues Retained CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 2,766,566.00 $ 2,759,948.94 $ 816,152.00 662,198.95 975,857.00 872,028.45 $ 4,558,575.00 $ 4,294,176.34 $ -6,617.06 -153,953.05 -103,828.55 -264,398.66 0.00 80,960.54 80,960.54 $ 4,558,575.00 $ 4,375,136.88 $ -_18_3....:.,.4_3_8._12_ EXPENDITURES Personal Services-Institutions Operating Expenses-Institutions Adult Literacy Grants $ 2,917,879.00 $ 2,688,391.77 $ 1,216,639.00 1,084,640.59 424,057.00 410,024.62 229,487.23 131,998.41 14,032.38 $ 4,558,575.00 $ 4,183,056.98 $ _ _--=3;...;,.7..;.,,:5,~51;.,;.8;.,;..0;;;;.,2 Excess of Funds Available over Expenditures $ 192,079.90 $===1=9:::::l2,=07:::9=.9=0 <.. - 2- PICKENS TECHNICAL INSTITUTE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET "B" LOTTERY FOR EDUCATION YEAR ENDED JUNE 30,1998 EXHIBIT"C" FUNDS AVAILABLE REVENUES State Appropriations BUDGET ACTUAL VARIANCE FAVORABLE (UNFAVORABLE) $ 40,000.00 $ 40,000.00 $ 0_,0_0 EXPENDITURES Equipment-Technical Institutes $ 40,000.00 $ 40,000.00 $ ...;;,O...;;,.O~O Excess of Funds Available over Expenditures $ 0,00 $=====0:=.0:=0 "'. -3- PICKENS TECHNICAL INSTITUTE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 1998 EXHIBIT"D" Totals per Annual Supplement Accruals June 30, 1997 June 30, 1998 SALARIES $ 2,546,036.53 $ TRAVEL 37,411.05 -87,123.02 23,531.20 $ 2,482,444.71 $ ===37=,4=1=1:=.0=5 "- .. -4- SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS <. PICKENS TECHNICAL INSTITUTE AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS 840-96-01 840-97-01 840-97-02 Further Action Not Warranted Partially Resolved - See Corrective Action/Response Partially Resolved - See Corrective Action/Response CORRECTIVE ACTIONIRESPONSES ACCOUNTING CONTROLS (OVERALL) Inadequate Separation of Duties Finding Control Number: FS-840-97-01 Pickens Technical Institute has hired an additional accounting technician to perform cashier and property function. With the addition ofthis employee we were able to separate key duties in the payroll and cash functions. Our organization chart shows current assignments. This audit finding is in the process of complete resolution. CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Finding Control Number: FS-840-97-02 Emphasis has been on the reconciliation of the operating account. Currently there is a $132.06 imbalance that needs resolving. I would like to explore an audit adjustment for FY '97 (or before) outstanding checks and reconciliation adjustments. The Pell account is reconciled to a $2.00 imbalance which must be resolved in FY '99. There have been no attempts to reconcile the payroll account to date. Work on payroll reconciliation will occur in FY '99. There have been procedural changes to improve timely booking of deposits and checks. This audit finding is partially resolved. SECTIONID CURRENT YEAR FINDINGS AND QUESTIONED COSTS "-.. PICKENS TECHNICAL INSTITUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures Finding Control Number: FS-840-98-01 For the year under review, the Institute's accounting procedures were insufficient to provide for adequate internal control over the bank reconciliation process. The following deficiencies were noted: (l) Book errors disclosed through the bank reconciliation process were carried as reconciling items for extended periods of time. (2) The monthly bank statements for the operating account and Federal funds account were not reconciled to the general ledger resulting in unidentified variances of $132.80 and $2.00, respectively, between the reconciled bank balance and the book balance. These variances remain unresolved at June 30, 1998. (3) The monthly bank statements for the payroll account were not reconciled to the general ledger for any month of the fiscal year. A difference of $77,232.89 between the bank balance and general ledger remains unresolved at June 30, 1998. These deficiencies were the result of management's disregard ofproper internal control procedures over cash and bank reconciliations that are necessary to adequately safeguard and report the cash and cash equivalents of the Institute. The Institute should establish appropriate internal controls to ensure that bank statements are reconciled with the accounting records monthly and that needed adjustments are recorded on a timely basis. EXPENDITURESIPAYABLESIDISBURSEMENTS Agency Fund Overpayments Finding Control Number: FS-840-98-02 For the year under review, the Institute's accounting procedures were insufficient to provide for adequate "'. internal control over Agency Funds. The following deficiencies were noted: (1) A deficit balance of $1,123.50 existed at year end within the Student Insurance account. This deficit balance was due to activities that occurred in prior periods that could not be explained by Institute personnel. (2) A deficit balance of $18.00 and $150.00 existed at year end within the fiscal year 1997 and 1998 Pell Accounts respectively. These deficit balance could not be explained. These deficiencies were the result of management's disregard of proper internal control procedures over Agency funds. The Institute should establish appropriate internal controls to ensure that these accounts are reconciled monthly and needed adjustments are recorded on a timely basis. Furthermore, appropriate action - 1- PICKENS TECHNICAL INSTITUTE SCHEDULE OF FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 1998 FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS EXPENDITURESIPAYABLESIDISBURSEMENTS Agency Fund Overpayments Finding Control Number: FS-840-98-02 should be taken by the Institute to secure reimbursement of any overpayments. Payments should not be made in excess of collections for Agency Funds. GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequate Property Management Procedures Finding Control Number: FS-840-98-03 For the year under review, our examination included a review of the controls utilized by Pickens Technical Institute in maintaining their property management system. The following conditions relating to inappropriate accounting practices were found to exist: (l) Equipment purchases were not updated to the PROPS (Property Records System) for items purchased in 1996, 1997 and 1998. (2) A physical inventory of equipment had not been conducted within the last two years. The Institute is required to maintain equipment inventories in accordance with provisions ofthe State Property Management System Manual. The discrepancies above were caused by the Institute's failure to follow guidelines for maintaining equipment inventories. The Institute should follow established procedures to ensure that equipment inventory records are maintained in accordance with the State Property Management System Manual. 't .. -2-