Arizona State Schools for the Deaf and the Blind: procedural review

              Procedural Review
A REPORT
TO THE
ARIZONA LEGISLATURE
Arizona State School
for the Deaf and the Blind
As of April 5, 2005
Financial Audit Division
Debra K. Davenport
Auditor General
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five
senators and five representatives. Her mission is to provide independent and impartial information and specific
recommendations to improve the operations of state and local government entities. To this end, she provides financial
audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and
conducts performance audits of school districts, state agencies, and the programs they administer.
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
June 30, 2005
Dr. Harold Hoff, Superintendent
Arizona State School for the Deaf and the Blind
P.O. Box 88510
Tucson, AZ 85754
Dear Dr. Hoff:
We have performed a procedural review of the Arizona State School for the Deaf and the Blind’s (ASDB)
internal controls in effect as of April 5, 2005. Our review consisted primarily of inquiries, observations, and
selected tests of internal control policies and procedures, accounting records, and related documents.
The review was more limited than would be necessary to give an opinion on internal controls. Accordingly,
we do not express an opinion on internal controls or ensure that all deficiencies in internal controls are
disclosed.
Specifically, we reviewed cash receipts, payroll expenditures, cash disbursements, journal entries,
purchasing, local and student checking accounts, capital assets, and financial reporting.
As a result of our review, we noted certain deficiencies in internal controls that the ASDB’s management
should correct to ensure that it fulfills its responsibility to establish and maintain adequate internal controls.
Our recommendations concerning them are described in the accompanying summary.
This letter is intended solely for the information and use of the ASDB and is not intended to be and should
not be used by anyone other than the specified party. However, this letter is a matter of public record, and
its distribution is not limited.
Should you have any questions concerning our procedural review, please let us know.
Sincerely,
Dennis L. Mattheisen, CPA
Financial Audit Director
Office of the Auditor General
TABLE OF CONTENTS
1
1
Recommendation 1: The ASDB should report
accurate financial information
Recommendation 2: The ASDB should prepare and
maintain an accurate capital assets list
Agency Response
page i
The ASDB should report accurate financial
information
The State's General Accounting Office (GAO) relies on financial information that it
receives from the ASDB in order to prepare Arizona’s state-wide financial statements.
Consequently, it is important that the ASDB provide accurate and complete financial
information to the GAO. However, auditors noted that the ASDB did not report
approximately $2.6 million of its trust fund investments to the GAO. As a result, these
investments were not reported in Arizona's June 30, 2004, state-wide financial
statements.
To help ensure that the ASDB's financial information is accurately reported within
Arizona's state-wide financial statements, the ASDB should provide all of its
investment information to the GAO within GAO's timelines annually. For the ASDB's
trust fund investments, this information includes the dollar amounts and types of
investments as well as information about the related investment risks.
The ASDB should prepare and maintain an
accurate capital assets list
The ASDB has invested a significant amount of money in its capital assets, which
consist of land, buildings, and equipment. Effective stewardship requires the ASDB
to have an accurate list of these assets and to ensure they are properly controlled
and accounted for. However, the ASDB did not have a complete and accurate capital
assets list and had not performed a complete physical inventory of its equipment in
the last 6 years. In addition, the ASDB could not reconcile capital assets added to
the list to capital asset expenditures or reconcile the current year’s list to the previous
year’s list. Also, the ASDB could not provide accurate capital assets information to
the State’s General Accounting Office for the preparation of Arizona’s state-wide
financial statements.
The following procedures can help the ASDB improve controls over its capital assets
and ensure that its list is accurate, complete, and properly reported:
• Prepare and maintain an accurate capital assets list of all ASDB assets costing
$5,000 or more and with useful lives of 1 year or more.
Office of the Auditor General
page 1
• Update the capital assets list at least annually for items acquired, disposed of,
or transferred.
• Perform a physical inventory of all equipment items at least every 2 years. Assign
an employee who has no custodial responsibilities to reconcile the inventory
results to the list and add items to or remove items from the list as necessary.
• Reconcile capital assets added to the list during the fiscal year to capital asset
expenditures, reconcile the prior year’s capital assets list to the current year’s
list, and make all necessary corrections.
• Reconcile the ASDB’s capital assets list to the State’s capital assets list, and
report all necessary corrections.
State of Arizona
page 2
June 22, 2005
Mr. Dennis L. Mattheisen, CPA
Office of The Auditor General
2910 North 44th Str., #410
Phoenix, AZ 85018
Dear Mr. Mattheisen:
Enclosed are the responses to the procedural review of the Arizona State
Schools for the Deaf and the Blind. Please know that the Agency’s
management will fulfill its responsibility of implementing an inventory
control system.
If you have any questions concerning the responses, please feel free to contact
me at 520.770.3601.
Sincerely,
Harold E. Hoff, Ph.D.
ASDB Superintendent
HEH/dg
Encs.
The ASDB should report accurate financial information.
ASDB agrees with your finding. ASDB will complete the CASH, CASH
EQUIVALENTS AND INVESTMENT SUMMARY FORM #5, which is part
of the State of Arizona Closing package in a timely manner.
Jacque Shaffer
Accounting Manager
ASDB
ASDB should prepare and maintain an accurate capital assets list.
ASDB is in the process of developing an inventory and assets control list that
will be compliant with state regulations. The intent is to allow ASDB to
maintain an accurate flow of assets into the agency, while in possession of the
agency and, finally, when the assets are moved to state surplus. We will
provide a physical inventory as defined in state statute. An employee will be
assigned to oversee the inventory. Current items will be listed in order to
provide an easy means for tracking the assets and movement within the
organization.
Once in place, procedures will be implemented to ensure a real time
inventory. After all items are inventoried, the list will be reconciled against
the state capital assets list. The inventory control system will be put in place
this summer and all items will be completely entered and reconciled by the
end of FY 06. The inventories of the coop sites, as well as the IT inventory,
are currently being completed.
Harold E. Hoff, Ph.D.
ASDB Superintendent