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

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State of GeorgiaFinancial Statement Findings and Questioned CostsFor the Fiscal Year Ended June 30, 2012Cause:Effect:Recommendation:A portion of the License Fees for Coin Operated Amusement Machines, as indicated above, wasretained by the Department to recover processing costs; however, we are unaware of either aconstitutional provision or a statutory authority allowing the Department to retain such fees.Retention and use of the aforementioned fees by the Department results in noncompliance with theGeorgia Constitution and O.C.G.A.As noted in the Information paragraph above, State funds to replace the retention of License Fees forCoin Operated Amusement Machines have been added to the Department of Revenue's budget by theAppropriations Act for fiscal year 2013. The Department of Revenue should consult with the AttorneyGeneral regarding any questions they may have regarding the constitutionality of or statutory authorityfor the retention of fees they collect.SECRETARY OF STATEFinding Control Number: FS-478-12-01ACCOUNTING CONTROLS (OVERALL)GENERAL LEDGERCASH, INVESTMENTS AND INVESTMENT RELATED ACTIVITYInadequate Bank Reconciliation and Accounting ProceduresCondition:Criteria:During our review of the Office of the Secretary of State's bank reconciliation process, we notedinstances where the bank reconciliations and the bank reconciliation approvals were not performed in atimely manner and an instance where a reconciling item was not recorded on the general ledger in atimely manner.In accordance with Cash Management Policies and Procedures Policy Number CM-100008 - BankReconciliation Policy and Procedure issued by the State Accounting Office (SAO), "All Agencies shallreconcile their state bank accounts monthly by an employee not involved in recording cash receiptsand disbursements. All monthly reconciliations should be reviewed and signed by a fiscal officer whodid not participate in the reconciling function. Book reconciling items shall be investigated andadjusting book entries shall be recorded within the same month as monthly bank reconciliation sheetsare received."An adequate system of internal controls calls for the performance of a monthly reconciliation betweenthe bank statement and the general ledger. Each bank reconciliation should be should be reviewed andapproved by someone not involved with the reconciliation and all reconciling items should becorrected in a timely manner.Information:Our review of the bank reconciliation for four (4) bank accounts at the Office of the Secretary of Staterevealed 15 instances where the reconciliation was not performed within 30 days and 20 instanceswhere the review and approval of the bank reconciliations were performed after 60 or more days.In addition for the Operations Bank Account, we noted that two (2) items listed as "Items in Transit"originally posted to the December 2011 reconciliation were still showing as reconciling items on theJune 2012 bank reconciliation.Cause:Effect:These deficiencies were the result of the Department's failure to adequately manage and monitor thebank reconciliation process, including adjusting the general ledger in a timely manner when applicable.In addition, the Accounting Supervisor for the Office of the Secretary of State indicated that there hadbeen significant turnover in staff during the past year and that this issue would be corrected goingforward.The failure to maintain an effective bank reconciliation process increases the risk of materialmisstatements in the financial statements including misstatements due to fraud.62
State of GeorgiaFinancial Statement Findings and Questioned CostsFor the Fiscal Year Ended June 30, 2012Recommendation:The Office of the Secretary of State should implement additional policies and procedures to ensure aneffective bank reconciliation process is in place, and reconciling items are reviewed and adjusted to thegeneral ledger in a timely manner when applicable.TRANSPORTATION, DEPARTMENT OFFinding Control Number: FS-484-12-01EXPENSES/EXPENDITURES AND LIABILITIESCloseout ProceduresCondition:Criteria:The Department of Transportation (Department) did not have adequate monitoring procedures in placeto ensure that their project closeout procedures were properly and consistently performed, documentedand completed in a timely manner by project managers or field operations personnel.The Accounting Procedures Manual for the State of Georgia (Manual), Section Five, Page 5-6-1 states,in part: “… monitoring helps to ensure that control activities and other planned actions that effectinternal control are carried out properly and in a timely manner and that the end result is effectiveinternal control. Ongoing monitoring activities include various management and supervisory activitiesthat evaluate and improve the design, execution, and effectiveness of internal control…” The Manualalso states that management should establish procedures for adequate inter-departmentalcommunication and “…should regularly ensure that the people they are responsible for are receivingand sharing information appropriately, and that information is timely, sufficient and appropriate to theuser(s).”According to the State Accounting Office (SAO) Accounting Directive AD 200905, "For properaccounting and year end calculation of surplus, all open encumbrances should be reviewed and anyfunds that will not be needed should be disencumbered. This is done by either canceling or closing thePurchase Order associated with the encumbrance."Information:Our examination of project data recorded in the Department’s accounting records revealed 610 openpurchase orders with no payment activity in over three (3) years. Of the 610 open purchase orders, theDepartment identified 213 open purchase orders with outstanding balances totaling $17,783,729.93that were not expected to have additional payments. These purchase orders were closed by theDepartment during the fiscal year.In addition, during our examination of ten (10) open purchase orders totaling $3,086,025.82 thatobligated State General Funds and had no payment activity in over a year, we identified three (3) openpurchase orders totaling $618,453.98 that should have been closed or canceled by the Departmentsince no additional payments were expected. Audit adjustments were posted to close these purchaseorders.Cause:Effect:Recommendation:The deficiencies noted above were a result of the Department’s failure to implement adequate internalcontrol procedures that provide for consistent monitoring of project closeout procedures and timelycommunication of project status.Inadequate monitoring procedures increase the risk of material misstatement in the financial statementsincluding misstatements due to error or fraud.The Department of Transportation should develop and implement monitoring procedures that enablemanagement to identify and investigate any delays in the completion of project closeout proceduresand evaluate the status of inactive projects in a timely manner.63
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