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

State of GeorgiaFinancial Statement Findings and Questioned CostsFor the Fiscal Year Ended June 30, 2012Effect:Recommendation:Failure to maintain an effective bank account reconciliation process increases the risk of misstatementdue to fraud and the possible misappropriation of the Department's assets.The Department of Human Services should review their current internal control procedures in relationto bank reconciliations and implement additional policies and procedures to ensure an effective bankreconciliation process is in place to manage and monitor their bank accounts.Finding Control Number: FS-427-12-09REVENUES AND RECEIVABLESInadequate Procedures Over Cash Draws of Federal GrantsCondition:The following deficiencies were noted based on our combined examination of the cash managementprocess over the seven (7) major Federal Financial Assistance Programs selected for the year underreview at the Department of Human Services' (Department):1. For all programs combined, a total of 31 months were identified where the requests forreimbursements were not sufficient to cover the respective Federal program expenditures. Theaverage monthly insufficient balances ranged from a low of $9.6 million to a high of $109 million.2. For all programs combined, a total of 52 months were identified where the requests forreimbursements were in excess of the respective Federal program expenditures. The averagemonthly excess balances ranged from a low of $15.8 million to a high of $59.9 million.3. Timing variances were identified between the reimbursement amounts recorded in the generalledger and amounts reported in the Department's Cash Management Database reports. A generalexplanation was provided for the variances, however, those explanations were not sufficient toaddress the reasons for each variance individually.Criteria:The Cash Management and Letter of Credit Procedures of the Department of Human Services statethat the objective of the Department’s cash management plan is to draw appropriate amounts of eachtype of fund available on an as-needed basis to assure that the Department does not have in excess ofthree days of Federal funds on hand, does not use state funds to subsidize Federal funds, and hassufficient funds to cover checks when they are presented.Code of Federal Regulations Title 31, Chapter II, Part 205.33 indicates that “a State must minimize thetime between the drawdown of Federal funds from the Federal government and their disbursement forFederal program purposes. A Federal Program Agency must limit a funds transfer to a State to theminimum amounts needed by the State and must time the disbursement to be in accord with the actual,immediate cash requirements of the State in carrying out a Federal assistance program or project.”Cause:Effect:The Department's policies and procedures for requesting, recording, and distributing Federal funds toreimburse program costs were inadequate.Failure to request, record, and distribute Federal funds in an accurate and timely manner could result inthe use of other sources of funds to subsidize Federal program expenditures.In addition, the drawdown of excess Federal funds over what is needed to cover Federal expenditurescould result in penalties and interest to the Department.Recommendation:The Department of Human Services should review their policies and procedures for requesting,recording, and distributing Federal funds to ensure that they are adequate to meet cash managementobjectives.44