Single Audit Report Fiscal Year Ended June 30, 2012 - State ...

State of GeorgiaFinancial Statement Findings and Questioned CostsFor the Fiscal Year Ended June 30, 2012which affected various fund sources and budget programs, did not contain sufficient documentation tosupport the validity of the entry being made.We performed inquiries of management to determine the purpose of the PCA entries. The inquiriesrevealed that the Department used the PCA entries to re-rate various fund sources and budgetprograms, and also to correct multiple issues that arose during the fiscal year.Cause:Effect:Recommendation:The deficiency noted above was a result of the Department's failure to implement adequate internalcontrol policies and procedures to ensure compliance with the Financial Management Policies andProcedures.Approving post closing adjustment entries without adequate supporting documentation may result in amaterial misstatement in the financial statements including misstatements due to fraud.The Department of Public Health should develop and implement policies and procedures to ensure thatadequate documentation is maintained and reviewed prior to approving post closing adjustment entries.Also, additional training on the guidelines included in the Financial Management Policies andProcedures should be provided to employees responsible for preparing and approving post closingadjustment entries as needed.FINANCING AND INVESTMENT COMMISSION, GEORGIA STATE (*)Finding Control Number: FS-409-12-01EXPENSES/EXPENDITURES AND LIABILITIESAccounts Payable and Related Expenses/ExpendituresCondition:Criteria:Cause:Effect:Recommendation:For construction payments, the Commission has historically recognized the liability and relatedexpenditure when the goods or services are received and approvals have been provided. For theCommission's transactions in which it is reimbursing another state agency, this practice is appropriateas the approvals and request for reimbursement would trigger the recognition of the liability andexpenditure for the Commission. However, for the Commission's transactions in which it is managingthe construction project on behalf of another state agency, the recognition of the liability and relatedexpenditure should occur when the good or service is provided.Under generally accepted accounting principles for governments, ordinarily a liability and relatedexpenditure should be recognized as soon as the goods or services are received, regardless of thetiming of the related cash flows.Due to the Commission's practice, an audit adjustment was required for the current year in order torecord additional accounts payable and expenditures for the Capital Projects Fund in the amount of$14,381,323.Audit adjustments were needed to correctly report liabilities and expenditures.We recommend that the Commission change its historical practice for accrual of fiscal year endexpenditures to ensure that payments made subsequent to year-end, on projects it is managing, arereviewed to determine if a liability is required due to the goods or services being received.30