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, 2012Finding Control Number: FS-484-12-02EXPENSES/EXPENDITURES AND LIABILITIESInternal Control Deficiencies Over Contractual ObligationsCondition:Our examination of the Department of Transportation’s (Department) fiscal year 2012 contractualobligations, which consisted of construction, consultant, railroad, utility and right-of-way contracts andcontract modifications (i.e. contract amendments and supplemental agreements), disclosed thefollowing deficiencies:1. The Department did not have adequate internal controls in place to monitor the recording ofconsultant, railroad, utility and right-of-way contracts and contract modifications.2. Controls performed to ensure the timely recording of construction contracts were not adequatelydocumented from July 2011 through March 2012.3. Fifty-two (52) contractual obligations were recorded on the general ledger more than sixty (60)days after execution by the Department. Forty-seven (47) of the fifty-two (52) contractualobligations were consultant contracts.4. One (1) supplemental agreement in the amount of $9,040.00 and three (3) consultant contractstotaling $1,970,419.41 were unrecorded as of fiscal year end. The supplemental agreement wasexecuted by the Department in October 2011 and the consultant contracts were executed in June2012.Criteria:An adequate system of internal controls dictates that contractual obligations be supported withadequate documentation and recorded on the general ledger in a timely manner to ensure that liabilitiesare recognized as soon as they are incurred in accordance with generally accepted accountingprinciples.The Department of Transportation's Contracts Processing policy (7110-9) states, in part:"It is the policy of the Georgia Department of Transportation, Office of General Accounting to processcontracts, supplemental agreements (SAs), and modifications (MODs) as they are received in theContracts Payable Unit on a daily basis or as time permits"; and"To ensure all construction contracts are received and recorded timely, the Contracts Payable Unit willcheck off the contracts as they are received on a tracking document created from the letting and followup periodically with appropriate departments/personnel if the contracts are not received."Information:Cause:Effect:Six (6) of the fifty-two (52) contractual obligations noted above were identified during our review ofsixty-one (61) contractual obligations consisting of twenty-one (21) individually significant itemcontractual obligations totaling $515,597,647.96 and forty (40) random sample item contractualobligations totaling $22,698,762.33 that were recorded on the Department’s general ledger during thefiscal year (FY). Furthermore, forty-six (46) of the fifty-two (52) contractual obligations wereidentified during our review of contractual obligation data, which included one hundred forty-five(145) items totaling $60,215,775.55, reported on six (6) vendor confirmations. The unrecordedsupplemental agreement and consultant contracts were also identified on the vendor confirmations.The deficiencies noted above were a result of the Department's failure to implement adequate internalcontrols to ensure the timely recording of consultant, railroad, utility and right-of-way contracts andcontract modifications and to provide for adequate documentation of controls in place over theconstruction contract recording process.Failing to record contractual obligations in a timely manner resulted in budgetary expenditures andliabilities being understated with fund balance being overstated by $1,979,459.41. In addition,64
State of GeorgiaFinancial Statement Findings and Questioned CostsFor the Fiscal Year Ended June 30, 2012inadequate internal controls over contractual obligations increase the risk of material misstatement inthe financial statements including misstatements due to error or fraud.Recommendation:The Department of Transportation should develop and implement additional internal control policiesand procedures that will enable management to consistently identify and investigate delays in therecording of consultant, railroad, utility and right-of-way contracts and contract modifications. Inaddition, management should monitor controls over the construction contract recording process toensure that the controls are properly performed and documented.Finding Control Number: FS-484-12-03CAPITAL ASSETSInadequate Capital Asset Records - LandCondition:Criteria:Cause:Effect:Recommendation:The Department of Transportation (Department) failed to maintain an adequate subsidiary capital assetinventory record for land. The Department's records as presented for audit did not include thefollowing information: Number of acres, location, parcel number, and total cost per parcel.The State Accounting Office's Accounting Policy Manual requires that state organizations maintain acomplete and accurate capital asset inventory record. The inventory record for land should includedetailed information such as number of acres or square footage, location, parcel number, and total costper parcel.The deficiency noted above is a result of management's failure to implement adequate policies andprocedures to ensure that the Department's capital assets are accounted for and reported in accordancewith guidelines established by the Accounting Policy Manual.Failure to maintain complete and accurate capital asset inventory records could result in themisappropriation of assets and a material misstatement in the financial statements.The Department of Transportation should maintain its land inventory in a manner such that each parcelof land identifies, at a minimum, the number of acres, location, parcel number, and cost (or estimatedhistorical cost).Finding Control Number: FS-484-12-100ACCOUNTING CONTROLS (OVERALL)GENERAL LEDGERFINANCIAL REPORTING AND DISCLOSUREBUDGETBudgetary Compliance DeficienciesCondition:Our examination of the Department of Transportation’s (Department) accounting records and statutorybasis financial statements as presented in the Budgetary Compliance Report disclosed the followingdeficiencies:1. We could not determine the accuracy of the prior year reserve carry-over amounts for “OtherFunds” by program, and consequently the subsequent adjustments to those balances in the currentyear.2. State Motor Fuel total funds available exceeded appropriated amounts, primarily attributable to aprior year audit adjustment amount from the Uncontrolled Program that was allocated by theDepartment to various programs during the current fiscal year. The amount adjusted during thefiscal year as reported under the column heading Program Transfers or Adjustments in theStatement of Funds Available and Expenditures Compared to Budget by Program and FundingSource was not appropriated to budget programs by the 2012 Amended Appropriations Act.65
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