CLAYTON STATE UNIVERSITY INDEPENDENT ACCOUNTANT S REPORT ON APPLYING AGREED-UPON PROCEDURES FISCAL YEAR ENDED JUNE 30, 2016 Morrow, Georgia
CLAYTON STATE UNIVERSITY - TABLE OF CONTENTS - Page INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES EXHIBITS A SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT 1 B C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE 2 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE 4
GREG S. GRIFFIN STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 February 16, 2017 Kristina A. Turner DIRECTOR (404) 657-4352 Members of the State Board of Regents of the University System of Georgia Dr. Tim Hynes, President Clayton State University Independent Accountant's Report on Applying Agreed-Upon Procedures Ladies and Gentlemen: We have performed the procedures enumerated below, which were agreed to by the Clayton State University (University) and the University System Office (Oversight Unit) of the Board of Regents of the University System of Georgia, solely to assist you in assessing the accuracy of the financial information reported to the University System Office in the University's 2016 Annual Financial Report for inclusion in the University System of Georgia's Annual Financial Report, the State of Georgia's Comprehensive Annual Financial Report (CAFR) and Single Audit Report; and to assist you in assessing the accuracy of the budget basis information provided in the Summary Budget Comparison and Surplus Analysis Report, Statement of Funds Available and Expenditures Compared to Budget By Program and Funding Source, and the Statement of Changes To Fund Balance By Program and Funding Source which are attached as Exhibits A, B and C, respectively. Clayton State University's management is responsible for the financial information reported to the University System Office in the University's Annual Financial Report. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures and the associated findings are as follows: 1. Review selected balance sheet items reported on the Annual Financial Report (AFR) (cash, accounts receivable, accounts payable, advances, net position, etc.). Confirm that these items have adequate supporting documentation and are properly reconciled to the University's general ledger. We noted many exceptions when comparing the selected items reported on the Statement of Net Position (SNP) to documentation presented by the University as follows: Cash per the SNP is understated by $82,056 when compared to supporting documentation. Accounts Receivable, net, per the SNP is overstated by $1,178,739 when compared to supporting documentation.
Documentation to support Prepaid Items reported on the SNP include invalid items resulting in the account being overstated by $80,651. The majority of the balance of accounts payable was not supported by backup documentation. The listing of accounts payable only included $67,618 of accounts payable related to the current fiscal year. The remaining balance, $1,203,914, was not documented. Benefits Payable totaling $11,508 reported on the SNP was not supported with backup documentation. Contracts Payable totaling $23 reported on the SNP was not supported with backup documentation. Deposits totaling $6,606 reported on the SNP was not supported with backup documentation. Advances reported on the SNP are understated by $153,768 when compared to the backup documentation provided. Other Liabilities reported on the SNP in the amount of a negative $24,784 was not appropriately documented. 2. Obtain the University's GAAP basis Statement of Net Position (SNP) and Statement of Revenues Expenses and Changes in Net Position (SRECNP) submitted for inclusion in the State's CAFR and Single Audit. Utilizing test scripts, confirm that financial information presented in these statements properly supports activity reported in the University's accounting records. The test scripts were ran and compared to the SNP and the SRECNP and the following issues were noted. Cash and Noncurrent Cash and Deferred Amount on Defined Pension Plans reported on the SNP totaling $10,656 and $216,573, respectively, do not agree to the test scripts. The University was unable to provide explanations for the variances. Student Tuition and Fees, Benefits Expense, and Supplies and Other Services reported on the SRECNP totaling $585,508, $371,210 and $232,068, respectively, do not agree to the test scripts. The University was unable to provide explanations for these variances. The University restated Beginning Net Position by $1,145,293 relating to Capital Assets on the SRECNP, however documentation was not provided to support the restatement. The auditor considers this restatement to be invalid. Auditor also performed analytical procedures comparing the prior year SRECNP to the current year SRECNP. Two line items did not fall within expectations and was not adequately explained. 1) Employee Benefits expense increased by over 10%. The University stated the increase was due to the increased cost of insurance, however documentation was not provided to support their explanation. 2) Supplies and Other Services expense increased by over 44%. The University stated this was due to additional funding to furnish the new science building. This does not appear to be an adequate explanation for the large increase and documentation was not provided.
3. Obtain the University's Statement of Cash Flows submitted for inclusion in the State's CAFR and Single Audit. Utilizing cash flow worksheets, confirm information reported on Statement of Cash Flows. We obtained the University s Statement of Cash Flows submitted for inclusion in the State s CAFR. We were not able to confirm the information reported. Many issues were found throughout the entire statement. These issues had a material effect on the financial statements. Because of the number of issues found, the auditor was unable to identify the misstatements on the Statement of Cash Flows. 4. Obtain the University's Notes to the Financial Statements submitted for inclusion in the State's CAFR and Single Audit. Utilizing notes worksheets and other supporting documentation confirm that note disclosures related to Cash, Investments, Accounts Receivable, Capital Assets, Long-Term Debt, Lease Obligations and Retirement Plans have been properly reported. We noted numerous issues during our review of the Notes to the Financial Statements as follows: The restatement of prior year net position in Summary of Significant Accounting Policies Note totaling $1,145,293 was not documented and therefore does not appear valid. The Deposits and Investments note is misstated due to errors within cash and cash equivalents; see item 14 below for details. The accounts receivable note is overstated by $1,178,739. The capital assets note is materially misstated, see item 13 below for details. Many other items were misstated by insignificant amounts. 5. Review the University's year-end GAAP basis journal entries. Obtain documentation for GAAP journal entries and confirm that the entries were posted to the University's Annual Financial Report. We did not note any exceptions as a result of our procedures. 6. Confirm that State Appropriation revenues, receivables and remittances of prior year surplus balances have been properly recorded in the University's financial records. Prior year surplus balances should be netted against State Appropriation revenues in the GAAP basis financial statements; however, prior year surplus balances should be reflected as fund balance adjustments on the Budget basis financial statements. We did not note any exceptions as a result of our procedures. 7. Obtain listing of write-off requests for accounts receivable less than $3,000.00 for fiscal year 2016. Confirm that these write-off requests have been approved by the State Accounting Officer and have been posted to the University's financial statements. The write off requests for accounts receivable less than $3,000 were approved by the State Accounting Officer and were posted to the University s financial statements. However, due diligence was not sufficiently performed for 3 of the 10 students tested. 8. Verify that the listing of salaries and travel reported to the Department of Audits is in accordance with O.C.G.A. Section 50-6-27 and reconciles to amounts recorded in the University's financial statements. We did not note any exceptions as a result of our procedures.
9. Review year end Budgetary Statements including the Summary Budget Comparison and Surplus Analysis Report (Exhibit A), Statement of Funds Available and Expenditures Compared to Budget By Program and Funding Source (Exhibit B) and the Statement of Changes To Fund Balance By Program and Funding Source (Exhibit C). Confirm that budget information presented in these statements supports activity reported in the University's accounting records, the legal level of budgetary control (funding source within program) was maintained, and determine if any budget over expenditures exist. We did not note any exceptions as a result of our procedures. 10. Obtain documentation for Budget basis reserves reported by University on the Summary Budget Comparison and Surplus Analysis Report (Exhibit A). Confirm that the reserves are properly documented, valid and appropriate. The University could not document the amount of the Reserve for Uncollectible Accounts Receivable which resulted in errors in several of the other reserve categories. Also, the amount of surplus to be returned to the central office is not correct. The University will be instructed to surplus this amount in Fiscal Year 2017. 11. Review the H.O.P.E. Scholarship Program reconciliation between the University and the Georgia Student Finance Commission. Confirm that information reported to the Georgia Student Finance Commission has been reconciled with H.O.P.E. Scholarship activity reported on the University's financial records. We did not note any exceptions as a result of our procedures. 12. Review the Schedule of Expenditures of Federal Awards information submitted by the University for inclusion in the Statewide Single Audit. Confirm that the information is properly presented and supported by the University's accounting records. The University s Schedule of Expenditures of Federal Awards information did not agree with the Federal expenditure activity reflected on the University s accounting records. Indirect costs totaling $17,747 for expenditures related to grants were not included on the schedule as required. Also, for three grants, revenue was reported instead of expenditures. 13. Review capital asset records to ensure that (1) subsidiary ledgers are appropriately reconciled to the ledgers, (2) capitalization thresholds are being properly followed, and (3) a complete annual physical equipment inventory is being conducted and that issues noted during the physical inventory are being properly addressed by management. Throughout the engagement the auditor found numerous issues with capital assets. Capital assets are potentially materially misstated. Below are known issues with capital assets: A reconciliation between the Asset Management Module, Capitals Ledger, and Capital Asset Note was not provided. Capital Assets, Net reported on the Annual Financial Report (AFR) is $132,281,081, the amount reported on the asset management module and other supporting backup is $131,463,561 and the amount reported in the Capitals Ledger is $132,373,469. The University was unable to document which balance is accurate. The total balance of Construction Work in Progress reported in Capital Asset Note of $1,355,977 was not appropriately documented and therefore the auditor could not determine it to be valid.
The addition of the Lakeview Arts and Science Building was understated by $2,451,926. The Capital Asset Note does show the proper amount of the building addition, but then includes a reduction of $2,451,926, which is not valid. The accurate value of the building is $22,451,926, however the building was added to the asset management module and capitals ledger at a value of $20,000,000. Equipment which was given to the school in relation to the Lakeview Arts and Science Building was not included in the equipment additions. This equipment is valued at $2,008,338 per Georgia State Financing and Investment Commission records. A chiller with a value of $350,000, for the Lakeview Arts and Science Building, was not included in the equipment additions. Equipment additions per the asset management module and documentation provided was $294,496 and Equipment additions per the Capital Asset Note was $863,045. Equipment reductions per the asset management module and documentation provided was $85,409 and Equipment reductions per the Capital Asset Note was $1,806,092. These differences net to an equipment change variance of $1,152,134. 14. Review bank reconciliations during the year under review to ensure that management is preparing them timely and that reconciling items are being addressed by management timely and in an appropriate manner. Bank reconciliations were reviewed for each quarter of Fiscal Year 2016 (September 2015, December 2015, March 2016, and June 2016) to determine if they were prepared and approved in a timely manner. Several reconciliations were not prepared and/or approved timely. The University does not appear to have a strong bank reconciliation process in place and follow-up of reconciling items was not performed in a timely manner for the operating account bank reconciliation. Eight reconciling items older than one year were not documented; these items have a value of $49,958. The auditor also requested documentation for 14 reconciling items that were less than one year old. Documentation was not provided for 10 of the 14 current year items requested. The absolute value of the current year reconciling items that could not be documented was $534,310. The outstanding check and wire transfers list did not agree to the balance on the operating account bank reconciliation by $94,069. Seven invalid general ledger accounts were found during the testing of the cash accounts which total $71,390. These accounts reported on the general ledger do not appear to be true cash accounts of the University. Auditor also noted an unidentified variance within the overall cash balance of $10,666. There are two bank accounts, Payroll Account and Scholarship Account in the amounts of $157,536 and $90, respectively, which do not appear to be included on the general ledger. Documentation was not provided to determine appropriate reporting.
15. Review documentation to ensure that all subsidiary modules including BANNER are reconciled to the general ledger at least quarterly in accordance with the Business Procedures Manual Section 10.6.2. and ensure that reconciling items are adequately explained and resolved in a timely manner. With the exception of Banner, the entity did not reconcile subsidiary modules to the general ledger on at least a quarterly basis in accordance with the Business Procedures Manual Section 10.6.2. 16. Review the supplementary "Statement of Revenues, Expenses and Changes in Net Position" for Auxiliary Enterprises submitted by the University to the University System of Georgia System Office to ensure that the schedule agrees to the auxiliary fund activity recorded in the accounting records. We did not note any exceptions as a result of our procedures. These agreed-upon procedures do not constitute an audit of the financial statements or any part thereof, the objective of which is to express an opinion on the financial statements or a part thereof. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the specified users listed above and is not intended to be and should not be used by anyone other than these specified parties. Respectfully, Greg S. Griffin State Auditor
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