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

State of GeorgiaFinancial Statement Findings and Questioned CostsFor the Fiscal Year Ended June 30, 2012LABOR, DEPARTMENT OFFinding Control Number: FS-440-12-01ACCOUNTING CONTROLS (OVERALL)Inadequate Supporting Documentation for Adjusting Journal EntriesCondition: Our examination included a review of five (5) adjusting journal entries totaling to $541,472,491.68that were posted to the Department of Labor's (Department) general ledger in the month of June 2012involving the Department's major Federal programs. The adjusting journal entries reviewed allocatedoverhead costs to specific programs, transferred expenses between grant years within programs, ortransferred expenses between programs. The supporting documentation for each of these journalentries was inadequate. They did not contain adequate explanations for the purpose of the journalentries, information was not provided to support the amounts adjusted, nor was there any indication ofthe original transactions being adjusted.Criteria:The Financial Management Policies and Procedures, policy number 4-8-1, issued by the Office ofPlanning and Budget and State Accounting Office, states that "Documentation should be maintainedfor adjustments posted during a fiscal year, especially as a part of year-end closing procedures, thatallows for the verification of the adjusted transaction to the source documentation supporting theoriginal transaction. Such documentation should include, but is not necessarily limited to, analysesidentifying original deposit ID's, purchase orders, voucher ID's or other relevant identifying referenceand should identify the original transaction's budget program by fund source or justification for achange in allocation methodology."Further, the Accounting Policy Manual, Category 3 - Closing Procedures, DocumentationRequirements, issued by the State Accounting Office, states in part that documentation "...Regardlessof the format used for storage purposes, all recorded transactions (including adjusting entries andtransfers) should be supported by copies of source documents (such as vendor invoices, receivingrecords, cash receipts, timesheets, loan documents, or bank statements) and other supportinginformation sufficient to provide clear evidence of...adjustments reclassifying transactions should betraceable to the documentation supporting the original transaction."Cause:Effect:Recommendation:The deficiencies noted were a result of the Department's failure to implement adequate internal controlprocedures to ensure compliance with the Financial Management Policies and Procedures and theAccounting Policy Manual for the State of Georgia.Approving and posting journal entries without adequate supporting documentation could result in amaterial misstatement in the financial statements including misstatements due to fraud.The Department of Labor should develop and implement policies and procedures to ensure thatadequate documentation is maintained and reviewed prior to approving and posting journal entries.Additional training on the guidelines included in the Financial Management Policies and Proceduresand the Accounting Policy Manual for the State of Georgia should be provided to employeesresponsible for preparing and approving journal entries.Finding Control Number: FS-440-12-02ACCOUNTING CONTROLS (OVERALL)Ineffective Change Management and Logical Access ControlsCondition:Criteria:Our review of the established internal control structure associated with certain financial applicationsrevealed deficiencies in change management and logical access controls designed to protect theintegrity of financial information, mitigate the risk of manipulation, corruption, or loss of data, andensure financial information is processed accurately.IT governance should be established over significant financial systems to prevent or detectunauthorized use, damage, loss, or modifications.52