MANAGEMENT REPORT SAVANNAH TECHNICAL INSTITUTE SAVANNAH, GEORGIA AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 1999 SAVANNAH TECHNICAL INSTDJITE MANAGEMENT REPORT - TABLE OF CONTENTS - LETTER OF TRANSMI'ITAL SECTION I SELECTED FINANCIAL INFORMATION EXHIBITS A ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND B SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION 2 C RECONCILIATION OF SALARIES AND IRAVEL 3 SECTIONll AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400 December 29,1999 Honorable Roy E. Barnes, 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 John D. Stewart, President Savannah Technical Institute Ladies and Gentlemen: As part ofour audit of the statutory basis financial statements of the State of Georgia presented in the State of Georgia Report of the 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 of and for the year ended June 30, 1999, we have perfonned certain audit procedures at Savannah Technical Institute. Accordingly, the financial statements and compliance activities ofSavannah 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 infonnation pertinent to the financial and compliance activities of Savannah Technical Institute as ofand for the year ended June 30, 1999. The particular infonnation provided is enumerated in the Table ofContents. This report is intended solely for the infonnation and nse ofmanagement and members of the Local Board ofDirectors of Savannah Technical Institute and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~:~ State Auditor RWH:jb SECTION I SELECTED FINANCIAL INFORMATION SAVANNAH TECHNICAL INSTITUTE ANALYSIS OF CHANGES IN FUND BALANCE BUDGET FUND YEAR ENDED JUNE 30 1999 FUND BALANCE -JULY 1,1998 Reserved ADDITIONS Adjustments to Prior Year's Accounts Payable Excess of Funds Available over Expenditures Exhibit"B" DEDUCTIONS Refund to Grantor Georgia Department of Technical and Adult Education - Administrative Central Office Federal Financial Assistance Adjustments to Prior Year's Accounts Receivable Reserved Fund Balance Carried Over from Prior Year as Funds Available FUND BALANCE - JUNE 30 1999 SUMMARY OF FUND BALANCE Reserved Inventories Live Work Projects Prior Year Local Funds Surplus EXHIBIT "A" "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION $ _ _---'5~6!..l7,~01~5~.0~9 $ 37,420.28 545,063.27 $ 582,483.55 $ 4,411.94 14,059.38 528,919.49 $ 547,390.81 $ 602,197,83 $ 50,965.69 6,221,37 520,000.00 25,010.77 $ 602,197.83 -1- SAVANNAH TECHNICAL INSTITUTE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30 1999 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) $ 6,509,791.00 $ 975,185.00 3,082.473.00 $ 10,567,449.00 $ 6,509,791.00 $ 756,223.06 2,819,896.55 10,085,910.61 $ 0.00 -218,961.94 -262,576.45 -481,538.39 520,000.00 528,919.49 8,919.49 $ 11,087,449.00 $ 10,614,830.10 $ -472,618.90 EXPENDITURES Personal Services-Institutions Operating Expenses-Institutions Excess of Funds Available over Expenditures $ 8,201,184.00 $ 2,886,265.00 7,623,446.92 $ 2.446,319.91 577,737.08 439,945.09 $ 11,087,449,00 $ 10,069,766,83 $_-..:.1.c:,O..;..17"",6:.,:8;.:;2:.:.1..:..7 $ 545,063.27 $ ~~.;;:5;;:;45~,O~6~3~.27.:.. -2- SAVANNAH TECHNICAL INSTITUTE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30. 1999 EXHIBIT"C" Totals per Annual Supplement Accruals June 30, 1999 SALARIES TRAVEL $ 6.089,203.88 $ 70,974.82 76,580.34 $ 6,165,784.22 $=....:7~O,~97.:.;4:,;:.8;:;,2 -3- SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SA\TANNAH TECHNICAL INSTITIITE AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30 1999 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-841-98-01 PartialIy Resolved - See Corrective Action/Responses CORRECTIVE ACTIONIRESPONSES REVENUESIRECENABLESIRECEIPTS Student Accounts Receivable Not Supported by Financial Aid Finding Control Number: FS-841-98-01 Savannah Technical Institute has reduced the amount ofthe student receivable balance by sixty four percent. The new student receivable balances, incurred in fiscal year 1999, were caused by overawards and we are attempting to colIect these. PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-841-98-01 FA-841-98-02 FA-841-98-03 FA-841-98-04 Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented CORRECTIVE ACTIONIRESPONSES ACTNITIES ALLOWED AND UNALLOWED Improper Expenditures for Financial Aid Services Vocational Education - Basic Grants to States (CFDA 84.048) Finding Control Number: FA-841-98-01 Savannah Technical Institute set up a payable for $21,277.55 to the U.S. Department of Education for this audit finding so that we could pay this amount to the Federal Government. This decision was derived after contacting Peter Vien of the Department of Audits who specializes in federal compliance audits and our Georgia Department of Technical and Adult Education to give us this resolution. Peter Vien stated the Federal Government wilI bill us for the amount in question. As of this date, Savannah Technical Institute has not received an invoice for these funds. - 1- SAVANNAH TECHNICAL INSIITIITE AUPITEE'SRESPONSE SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30 1999 PRIOR YEAR FEDERAL AWARD FiNDINGS AND OUESTIONED COSTS CORRECTIVE ACTIONIRESPONSES ALLOWABLE COSTS/COSTS PRINCIPLES Improper Overtime Payments Vocational Education - Basic Grants to States (CFDA 84.048) Questioned Costs: $5,872.00 Finding Control Number: FA-841-98-02 We explained in our corrective action plan that Savannah Technical Institute became a State of Georgia Institute on July 1, 1997. As a result, insufficient training was received by Savannah Technical Institute employees during the transition to state governance. Overtime cannot be paid to any state employee unless the grantor approves such action. Savannah Technical Institute's Administrative Services office understands this policy and plans to adhere to all state regulations and procedures along with the entire staffof Savannah Technical Institute. A letter was issued from Savannah Technical Institute directed to the Department of Technical and Adult Education's (DTAE) Budget Director on May 3, 1999 to explain the circumstances surrounding this finding. The auditors have requested an itemized statement from DTAE's Assistant Commissioner on each individual finding justifYing their approval. We have requested that letter from the DTAE's Assistant Commissioner of Administrative Services. -2- SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SAVANNAH TECHNICAL INSTIDJTE SCHEDULE OF FINDINGS AND QUESTIONED CQSTS YEAR ENDED JUNE 30 1999 . FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS Inadequacies in Bank Reconciliation Procedures Finding Control Number: FS-841-99-01 For the year under review, Savannah Technical Institute's accounting procedures were not sufficient to provide for adequate control over the bank reconciliation process. Review procedures and interviews with personnel of the Institute revealed that bank reconciliations for the general operating bank account were not reconciled in a timely manner. The Institute should establish the necessary procedures to ensure that bank statements are reconciled timely. CASH AND CASH EQUIVALENTS Uncollateralized Deposits Finding Control Number: FS-841-99-02 As of June 30, 1999, Savannah Technical Institute failed to have its time deposits fully collateralized as provided for by the Official Code of Georgia Annotated Section 50-17-59. This noncompliance occurred because ofmanagement's failure to adequately monitor the collateralization of balances at individual banks. The Institute should implement procedures to monitor the collateralization of time deposits to ensure compliance at all times with State laws governing deposits and investments. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ELIGmILITY hnproper Determination ofEmollment Status Pell Grant Program (CFDA 84.063) Questioned Costs: $1,276.00 Finding Control Number: FA-841-99-01 An examination ofthe financial aid records and class schedules oftwenty students receiving Federal financial aid revealed two students who were awarded and disbursed $1,276.00 of Title IV assistance in excess of allowable limits based on their emollment status. Federal regulations (34 CFR 690.63) and The Federal Student Financial Aid Handbook require that a student's Pell Grant payment for each payment period is calculated by determining the student's enrollment status for the term. Based upon that enrollment status the award is determined by payment and disbursement schedules established by the U.S. Department of Education. In the two instances identified, one student was not emolled during the period which resulted in the above overpayment and the second student withdrew before mid-term during the period of enrollment. - 1- SAVANNAH TECHNICAL INSTITUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30 1999 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS EUGIBILITY Improper Determination ofEnrollment Status Pel1 Grant Program (CFDA 84.063) Questioned Costs: $1,276.00 Finding Control Number: FA-841-99-01 Two other exceptions were noted which resulted in underpayments ofPel1 funds. In these two instances, conversion of student clock honrs for certain programs of study were improperly calculated resulting in underpayments ofPel1 Grants of$313.00. One student was eligible for the maximum amount al10wed for a ful1-time student. However, this student was incorrectly awarded aid based on the three-quarter time enrollment scale. In the other instance, a student was eligible to receive aid based on the three-quarter time enrollment scale, but was incorrectly awarded aid based on the one-halftime scale. These questioned costs and noncompliance resulted from management's failure to properly monitor the enrollment status of financial aid recipients and to properly calculate the conversion of student clock honrs. The Institute should implement procedures to ensure that the enrollment status of financial aid recipients and the student clock hour conversion calculations are monitored to ensure financial aid is awarded and disbursed according to program regulations. Reimbursement of$I,276.00 should be secured for refund to the Pell Grant program. EQUlPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Vocational Education - Basic Grants to States (CFDA 84.048) Finding Control Number: FA-841-99-02 For the year under review, our examination included a review of the controls utilized by Savannah Technical Institute in maintaining their property management system. This review also included testing for compliance with Federal laws and regulations. The following deficiencies in the equipment inventory records were noted: (1) Five items were recorded on the PROPS inventory records at the purchase order price rather than the invoice price, resulting in the inventory records being overstated by $2,645.00. (2) One item costing $1,956.00 was recorded on the inventory records at zero cost. (3) Two items costing $4,041.00 had no decal number assigned and could not be located. (4) Ten equipment items totaling $19,746.00 were improperly reflected on the PROPS equipment records as federally funded. (5) One item with an assigned decal number, costing $3,353.00, did not appear on the inventory records. (6) Fiscal year 1998 purchases in the amount of$50,796.46 were not added to the PROPS inventory system until fiscal year 2000. -2- SAYANNAH TECHNICAL INSTmrrE SCHEDULE OF FlNDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30 1999 FEDERAL AWARD FINDINGS AND mJESTIQNED COSTS EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Vocational Education - Basic Grants to States (CFDA 84.048) Finding Control Number: FA-841-99-02 The Institute is required to maintain equipment inventories in accordance with paragraph 21 of OMB's Unifoon Administratiye Requirements for Grants and COQPerative Agreements to State and Local Governments (Common Rule). The deficiencies identified above were caused by the Institute's failure to follow guidelines for maintaining property management records and the failure to establish appropriate procedures to ensure property management records were properly maintained. The Institute should implement necessary controls to ensure that equipment inventories are maintained in accordance with provisions of OMB's Common Rule. - 3-