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Audits can bring changes

POSTED: June 2, 2014 4:33 p.m.

If there is one agency whose reports usually do not gather dust on the shelf, it is performance audits that the Performance Division conducts on state agencies and on state processes. The audits usually include a response from the agency that may sometimes get out ahead with publicity addressing issues that will be revealed when the audit is released.

Sometimes agencies don’t like someone looking over their collective shoulders and can react defensively. But policy leaders in state government look very critically at problems or recommendations pointed out by performance audits and there is often accompanying publicity that also marshals public opinion for change.

Performance Division reviews state operations for improvements
Roughly 20 performance audits occur each year on a wide range of issues. For example, a recent audit uncovered a lack of oversight and regulation of misdemeanor probation providers across the state, that led to unfair treatment of probationers and inconsistent financial reporting to the courts. These non-financial audits provide operational information on a program or topic that assists the General Assembly in setting policy. Audit topics may be requested by the House Appropriations Committee, Senate Appropriations Committee, governor or initiated by DOAA itself.

Providing services to improve accountability
The Technology and Risk Division evaluates the security of critical information technology systems used by the state government, so that the confidentiality, integrity, and availability of government and the protection of citizen data are safe both from system failures and cyber-attacks. County and municipal governments submit financial audit reports to the Nonprofit and Local Government Audits Division, which checks that governments follow proper accounting procedures, reports on the financial soundness of local retirement systems in Georgia, and provides recommendations for any corrective actions that local governments ought to take.

This division also receives audits and financial statements from nonprofit organizations in Georgia, who are required by Georgia law to submit these to DOAA for review.

The audit necessity
Some audits, such as the financial reviews completed annually of school systems and state agencies, are necessary to perform accounting and auditing related research to ensure successful implementation of generally accepted accounting principles (GAAP) and government auditing standards.

For example, the Education division issues audit opinions on GAAP compliant financial statements. These annual audit engagements of local education agencies (LEAs) are necessary for several reasons. First, the Single Audit Act and federal regulations requires that LEAs that expend $500,000 or more in federal awards in a fiscal year receive a Single Audit performed annually for oversight.

Additionally, in compliance with the Single Audit Act, the financial statement audit is required which reviews fund balances, long-term liabilities and cash and investment positions among other reviews. These requirements focus on addressing fraud, waste and abuse as well as accountability and transparency.

Also, as mentioned previously, a majority of LEAs within Georgia have general obligation bonds outstanding. Bond covenants and rating agencies require an annual financial audit engagement to assess or affirm financial ability to cover obligations.

Finally, the Southern Association of Colleges and Schools guidelines require a LEA requesting or reaffirming accreditation.

While laws and regulating groups require audits, their necessity is in providing transparency about the fiscal position of operations. Whether state agency or LEA, audits provide information about the fiscal health of an organization.

The education audit process
Although the audit process hasn’t changed, like most state agencies, DOAA received budget reductions that affected their operations throughout the recession as well.  Although statutorily obligated to issue audit opinions on all LEA financial statements, some systems concerned about the timing availability of DOAA-performed audits for bond sales or displeased with the DOAA audit opinion have sought private auditors to meet the legal requirements. DOAA is now positioned to begin to work with LEAs to ensure all audits are performed in accordance with state law, including DOAA working to perform all engagements.

As Georgia continues to recover from the recession, all LEAs should work with DOAA to address their required audit schedule and select a target date when all LEA audits will transition back to DOAA.

Conclusion
For an agency its size, you would be hard-pressed to find another state agency that does more to save state dollars. Audits have led to improvements in the lives of Georgians. A 2010 audit of adult drug courts found that recidivism among successful participants was much lower and thus these courts save the state over incarceration. This success has led to legislation and over $10 million in new funding to create not only additional drug courts around the state, but other accountability courts as well.

A 2013 audit on state corrections and community officer salaries found that low wages contributed to high turnover and increased training costs. The FY 2015 budget includes targeted pay increases to increase starting salaries. A 2008 review of bridge condition and maintenance led GDOT to take additional steps to ensure school buses do not traverse bridges with weight limits of less than 10 tons. GDOT began notifying school boards and closing bridges and posting notifications which led to a program of repair.

The department’s expertise should give Georgia taxpayers confidence that their tax dollars are being spent lawfully and effectively.

I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7092 (fax)
E-mail at Jack.Hill@senate.ga.gov
Or call toll-free at
1-800-367-3334 day or night
Reidsville office: (912) 557-3811

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