STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS GiA A2oo @ R\ v~ PS \ct99-.iooo MANAGEMENT REPORT APPALACHIAN TECHNICAL INSTITUTE JASPER,GEORGIA AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 2000 Russell W. Hinton State Auditor . APPALACHIAN TECHNICAL INSTITUTE MANAGEMENT REPORT -TABLE OF CONTENTS- LETTER OF TRANSMITTAL SECTION I SELECTED FINANCIAL INFORMATION EXHIBITS A ANALYSIS OF CHANGES IN FUND BALANCE BUDGETFUND 1 SCHEDULESOFFUNDSAVAILABLEANDEXPENDITURES COMPARED TO BUDGET BUDGET FUND B "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION 2 C "B" LOTTERY FOR EDUCATION 3 SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION ID CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS tussELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 November 9, 2000 Honorable Roy E. Barnes, 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 Appalachian Technical Institute Ladies and Gentlemen: As part ofour audit ofthe statutory basis financial statements ofthe State ofGeorgia presented in the State ofGeorgia Report ofthe State Auditor, the general purpose financial statements ofthe State of Georgia presented in the State ofGeorgia Comprehensive Annual Financial Report, and the issuance of a Statewide Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2000, we have performed certain audit procedures at Appalachian Technical Institute. Accordingly, the financial statements and compliance activities ofAppalachian 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 financial and compliance activities of Appalachian Technical Institute as of and for the year ended June 30, 2000. The particular information provi_ded is enumerated in the Table of Contents. This report is intended solely for the information and use ofmanagement and members ofthe Local Board of Directors of Appalachian Technical Institute and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:jb State Auditor SECTION I SELECTED FINANCIAL INFORMATION APPALACHIAN TECHNICAL INSTITUTE ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND YEAR ENDED JUNE 30, 2000 EXHIBIT"A" FUND BALANCE - JULY 1. 1999 Reserved Surplus ADDITIONS Adjustments to Prior Year's Accounts Payable Excess of Funds Available over Expenditures Exhibit "B" Exhibit "C" DEDUCTIONS Unreserved Fund Balance (Surplus) Returned to Georgia Department of Technical and Adult Education - Administrative Central Office Year Ended June 30, 1999 Adjustments to Prior Year's Accounts Receivable Refunds to Grantors Federal Financial Assistance Georgia Department of Technical and Adult Education - Administrative Central Office Other Reserved Fund Balance Carried Over from Prior Year as Funds Available "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION "B" LOTTERY FOR EDUCATION $ 93,231.09 14 320.45 $ 178.20 $ 107 551.54 $ 178.20 $ 24,755.13 -67,658.27 $ $ -42,903.14 $ 11,340.82 11 340.82 $ 14,320.45 $ 19,689.92 2,189.15 82.56 90,959.38 $ 127,241.46 $ 178.20 178.20 FUND BALANCE - JUNE 30, 2000 $ -62,593.06 $ =======11:!.3=4=0=.8=2 SUMMARY OF FUND BALANCE Reserved Federal Financial Assistance For Refund to Grantor Agency Georgia Department of Technical and Adult Education - Administrative Central Office Other Surplus/(Deficit) $ 2,385.17 6 950.31 $ 9,335.48 -71,928.54 $ _ _ __:.1..:.1c::;3...:.40::..:.::.:82=- $ - 1- -62,593.06 $ ====1=1=3=4=0=.8=2 APPALACHIAN TECHNICAL INSTITUTE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30, 2000 EXHIBIT"B" FUNDS AVAILABLE REVENUES State Appropriation $ Federal Revenues Other Revenues Retained $ CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance BUDGET 3,059,363.00 $ 1,243,208.99 872,346.00 5,174,917.99 $ 0.00 ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) 3,074,534.38 $ 838,632.98 825,209.84 4,738,377.20 $ 15,171.38 -404,576.01 -47136.16 -436,540.79 90,959.38 90,959.38 EXPENDITURES Personal Services-Institutions Operating Expenses-Institutions Adult Literacy Grants Capital Outlay Year 2000 Project Funding $ 5,174,917.99 $ 4,829,336.58 $ -345,581.41 ------''----- $ 3,142,867.99 $ 3,166,997.23 $ 1,542,968.00 1,249,817.79 469,882.00 467,641.51 10,000.00 10,000.00 9,200.00 2,538.32 -24, 129.24 293,150.21 2,240.49 0.00 6,661.68 $ 5,174,917.99 $ 4,896,994.85 $ - - - -2-7-7,'92-3-.1-4 Excess of Funds Available over Expenditures $ -67,658.27 $ ===-6=7=,6=5=8.=2=7 -2- APPALACHIAN TECHNICAL INSTITUTE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND "B" LOTTERY FOR EDUCATION YEAR ENDED JUNE 30, 2000 EXHIBIT"C" FUNDS AVAILABLE REVENUES State Appropriation BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 211,558.00 $ 211,558.00 $ - - - - -0.0-0 EXPENDITURES Equipment-Technical Institutes $ 211,558.00 $ 200,217.18 $ - - - -1-1,-34-0.8-2 Excess of Funds Available over Expenditures $ 11,340.82 $ =====11=,3=40=.8=2 -3- SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS APPALACHIAN TECHNICAL INSTITUTE AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 2000 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-840-98-01 FS-840-98-02 FS-840-98-03 FS-840-99-01 FS-840-99-02 Further Action Not Warranted Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequate Property Management Procedures Finding Control Number: FS-840-98-03 Last physical inventory was winter/spring of 1999. My intent was to do another inventory during fiscal year 2000 to verify update. Training and system schedules did not allow time for the additional physical inventory. There will be an inventory in the winter/spring of 2001. CASH AND CASH EQUNALENTS Inadequate Accounting Procedures Finding Control Number: FS-840-99-01 The bank account reconciliations were contracted to Jefferson-Wells. The Institute was not comfortable with making end of year adjusting entries and waited for the audit department's help. Work was done on reconciliation of the payroll account with substantial progress. Appalachian Technical Institute still has a lot of work to clean up this deficiency. EXPENDITURES/PAYABLES/DISBURSEMENTS Agency Fund Overpayments Finding Control Number: FS-840-99-02 Trust accounts were reviewed for revenue issues. More work is necessary. SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS APPALACHIAN TECHNICAL INSTITUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2000 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUNALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Deficiencies in Accounting Procedures Finding Control Number: FS-840-00-01 The financial accounting information presented for examination was in exceedingly poor condition. Numerous deficiencies were noted as follows: (1) Cash and Cash Equivalents Bank reconciliations for the operating, payroll, equity and Pell accounts were not performed for any month during the year under review. Early in the year, the Institute contracted with a local accounting firm to reconcile bank accounts. Extensive efforts were made to accurately reconcile cash. However, due to the poor condition of the accounting records, cash could not be properly reconciled from the bank statement balances to the general ledger. Additional work performed by the Department ofAudits in conjunction with information provided by the accounting firm resulted in necessary adjustments to cash of$1,519,942.32 in the Budget Fund and $1,652,864.18 in Agency Funds. (2) Revenue/Receivables/Receipts Our testing revealed instances where receivables and their corresponding revenues were not properly requested and/or recorded on the general ledger. Federal funds were not requisitioned in a timely manner, which resulted in deficit balances in several programs. Extensive procedures were required to produce a detail of accounts receivable at June 30, 2000. These procedures resulted in necessary adjustments to receivables in the Budget Fund of $162,967.21 and adjustments to receivables in Agency Funds of $94,498.69. (3) Expenditures/Liabilities/Disbursements The Institute could not provide an accurate detail of accounts payable at June 30, 2000. Accounts payable reports were not reconciled to the general ledger and adjustments were not made by the Institute to properly liquidate payables during the year and/or correct those payables for which only partial payment was made. As a result ofthese deficiencies, extensive procedures were required to produce a detail ofaccounts payable at June 30, 2000. These procedures resulted in necessary adjustments of$79,435.86 and $211,114.67 to accounts payable in the Budget Fund and Agency Funds, respectively. At June 30, 2000, an unidentified variance of$472.12 remained in accounts payable of the Budget Fund. - 1- APPALACHIAN TECHNICAL INSTITUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2000 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Deficiencies in Accounting Procedures Finding Control Number: FS-840-00-01 The lack of adequate overall controls as discussed above led to current year expenditures exceeding funds available by $67,658.27. These deficiencies occurred because management failed to ensure that proper internal control procedures were implemented for basic accounting procedures. Management should establish necessary changes to provide for an adequate system of internal controls to provide reliable accounting records. EXPENDITURES/PAYABLES/DISBURSEMENTS Agency Fund Overpayments Finding Control Number: FS-840-00-02 The Institute's accounting procedures were insufficient to provide for adequate internal control over Agency Funds. A deficit balance of $1,575.00 existed at year end within the Pell account. This deficit balance was attributable to activities that occurred in prior periods that were never recorded on the general ledger by the Institute. The Institute should establish appropriate internal controls to ensure that Agency accounts are reconciled monthly and necessary adjustments are recorded in a timely manner. Appropriate action should be taken by the Institute to ensure that payments are not made prior to collections for Agency Funds. -2-