I realize this is a long post but it is well worth reading. Please post your responses for after all it is your money. Allen Barrett
RESULTS OF AUDIT ENDING 30 JUNE 2007
UNCORRECTED FINDINGS FROM PRIOR AUDITS:
COUNTY: Government wide financial statements were not presented in accordance with generally accepted accounting principles.
COUNTY EXECUTIVE: Office had deficiencies in purchasing procedures.
DIRECTOR OF SCHOOLS: 1. Had deficiencies in purchasing procedures. 2. Office had accounting deficiencies.
OTHER FINDINGS: Duties were not segregated adequately in the Offices of Highway Commissioner, Director of Schools, Trustee, Clerk and Master, and Register.
SUMMARY OF AUDITORS RESULTS:
1. An adverse opinion was issued on the financial statements of Giles County.
2. The audit of the financial statements of Giles County and the Giles County School Department disclosed significant deficiencies in internal control. One of the deficiencies was considered to be a material weakness for the Giles County School Department.
3. Audit disclosed significant deficiencies in internal control over major programs.
FINDINGS GILES COUNTY:
Finding 07.01 - Giles County financial statements are not presented in accordance with generally accepted accounting principles, thus we have issued an adverse opinion on its fincial statements.
FINDING 07.02 – 1. The office had deficiencies in purchasing procedures. ITEM 2. Office issued purchase orders after purchases were made.
OFFICE OF DIRECTOR OF SCHOOLS
Finding 07-03 – The office had deficiencies in purchasing procedures. ITEM 1. In several instances purchase orders were issued after purchases were made. ITEM 2. In several instances disbursements were made without proper documentation of purchases. ITEM 3. Competitive bids were not solicited for sidewalks $15,100 built at two schools during the 2006-2007 year.
MANAGEMENT RESPONSE- DIRECTOR OF SCHOOLS: ITEM 1 Board of Education implemented purchasing procedures effective July 1, 2006 to provide more accountability and improved internal control. We are continuing to improve internal controls within our purchasing procedures to insure that purchase orders are not issued after purchases have been made. ITEM 2 We realize this is an area of concern and have established improved internal controls requiring documentation at the time a purchase order is requested.
Finding 07-04 – The office had accounting deficiencies audit disclosed. ITEM 1. Post-employment medical insurance benefits were not paid in compliance with the School Department’s negotiated agreement with employees. The agreement provides for the School Department to pay for retiree’s medical insurance premiums up to a maximum of $2,880.00 per year. Insurance premiums paid on seven retired employees exceeded this maximum by amounts ranging from $324.00 to $2,186.00. The total amount paid in excess of maximum of the year ended June 30, 2007 was $8,409.00. ITEM 2. Our examination disclosed a total of 223 journal entries that were posted to the general ledgers for the four funds maintained by the School Department. Many of these journal entries were not adequately explained. Such a high number of journal entries indicates weakness in internal controls over the recording of financial transactions. Fifty-four of these entries were to correct previous entries. In addition to these entries accounting personnel used the cash disbursements journal and the cash receipts journal to make various adjustments to the general ledger. The cash dispersements and cash receipts journals should not be used to adjust the general ledger. ITEM 3. Financial records of the general purpose school fund reflected a reservation of fund balance for the Basic Education Program (BEP) totaling $697,729.00 at June 30, 2007. However school personnel were unable to provide any documentation to support this reservation of fund balance. Our examination disclosed that there was no reserve for BEP at June 30, 2007. ITEM 4 During the year the School Department opened an escrow account to deposit funds withheld from contractor payments as required by Section 66-11-144, Tenn. Code Annotated. The funds held in the escrow account are paid to the contractor at the conclusion of the project if the contractor fulfills the terms of the contract. At June 30, 2007 the School Department had deposited the proper amount to the escrow account, however subsequent to June 30, 2007 construction billings indicate that the School Department should have deposited an additional $42,294.00 but it actually deposited an additional $109,276.00. Future deposits to the escrow account should be reduced by the overpayment of $66,982.00.
MANAGEMENT RESPONSE - DIRECTOR OF SCHOOLS: TO ITEM 2 We made every effort to decrease the number of journal entries made in the general purpose school fund and in the central cafeteria fund. Also we will try to improve the supporting documentation for journal entries. TO ITEM 4 The overall contract was never overpaid, and the project was still ongoing at June 30, 2007. The funds in question were not accessible by the contractor. The excess deposits were corrected with the payment of the next pay request after we discovered the situation. At no time was the contractor over paid. We will be more diligent in the future concerning escrow calculations and deposits during construction projects.
FINDING 07-05 OFFICE HAD DEFICIENCIES IN ADMINISTRATION OF FEDERAL GRANTS
ITEM 1 – The School Department did not designate a person to be responsible for monitoring the request and subsequent receipt of grant reimbursements. This resulted in a May 2006 reimbursement payment ($6,327.00) for the Education Technology State Grants program being mistakenly deposited into the Improving Teacher Quality State Grants program. This error went undetected until discovered by auditors in Oct.2007. ITEM 2 – During the year, the School Department received Hurricane Education Recovering Act Grant funds of $21,780.00. These funds were posted to the School Federal Projects Fund however these grant funds should have been posted to the General Purpose School Fund. School Department personnel were not aware of this error until notified by auditors in Oct. 2007.
MANAGEMENT RESPONSE DIRECTOR OF SCHOOLS – ITEM 1 Federal projects grant administrators will monitor the projects that they are responsible for to ensure accurate reporting. ITEM 2 We will try to be more detail oriented in the future in regard to revenues. Sometimes there is a problem identifying specific non-recurring revenues due to revenue being reported on the monthly trustee’s repost as a total.
FINDING 07-06 EXPENDITURES EXCEEDED APPROPRIATIONS
ITEM 1 Expenditures exceeded total appropriations by the County Commission in the Central Cafeteria Fund by $19,915.00. ITEM 2 Expenditures exceeded appropriations in the Vocational Education Program ($546.00) and other Student Support ($25,998.00) major appropriation categories (the legal level of control) of the School Federal Projects Fund.
MANAGEMENT RESPONSE – DIRECTOR OF SCHOOLS ITEM 1 This has not occurred in the past in the Central Cafeteria Fund and every effort will be made to ensure that this does not happen again.
FINDING 07-07 GENERAL LEDGER PAYROLL LIABILITY ACCOUNTS – ITEM 1. General ledger payroll liability accounts were not reconciled with payroll reports and payments. The failure to reconcile payroll liability accounts on a regular basis allows errors to remain undiscovered and uncorrected. Records of the School Department reflected negative account balances in 23 payroll liability accounts at June 30 2007. The failure to reconcile these accounts led to these negative account balances not being corrected.
FINDING 07-08 OTHER FINDINGS DUTIES NOT SEGREGATED ADEQUATELY IN THE OFFICES OF HIGHWAY COMMISSIONER, DIRECTOR OF SCHOOLS, TRUSTEE, REGISTER AND CLERK AND MASTER.
ITEM 1 In the Director Of Schools and employee who was responsible for preparing and posting disbursements to the accounting records and reconciling disbursements with the trustee’s report also had access to the mechanical warrant signing machine for all funds administered by the Director of Schools. ITEM 2 In the Offices Of Highway Commissioner, Trustee, Register and Clerk and Master employees responsible for maintaining accounting records were also involved in receipting, depositing and/or dispersing funds.
MANAGEMENT RESPONSE
DIRECTOR OF SCHOOLS – Giles County is now under a centralized system of accounting resulting from the adoption of the County Financial Management System of 1981. This new system should ensure the segregation of duties for all county departments including the Office of Director of Schools.
REGISTER – The cost of hiring enough employees to segregate each step involved is not feasible for the Register Of Deeds Office. The budget will not allow us to increase our staff to comply with these guidelines.
