Commonwealth of Virginia Single Audit Report for the Year ended June 30, 2006
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Commonwealth of Virginia Single Audit Report for the Year ended June 30, 2006

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104 Pages
English

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COMMONWEALTH OF VIRGINIA SINGLE AUDIT REPORTFOR THE YEAR ENDEDJUNE 30, 2006EXECUTIVE SUMMARY The results of our single audit of the Commonwealth of Virginia for the year ended June 30, 2006, are summarized below: • we issued an unqualified opinion on the basic financial statements; • we found certain matters that we consider reportable conditions; however, we do not consider these to be material weaknesses; • we did not identify instances of noncompliance with selected provisions of applicable laws and regulations which could have a material effect on the basic financial statements; • we did find certain matters and instances of noncompliance with selected provisions of laws and regulations related to major programs required to be reported in accordance with OMB Circular A-133, Section .510(a). One of these matters is identified as a material weakness in the internal control over major program; and • we issued an qualified opinion on the Commonwealth’s compliance with requirements applicable to each major program. Our audit findings are reported in the accompanying, “Schedule of Findings and Questioned Costs.” - T A B L E O F C O N T E N T S - Page EXECUTIVE SUMMARY INTRODUCTION LETTER 1 INDEPENDENT AUDITOR’S REPORTS: Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government ...

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COMMONWEALTH OF VIRGINIA
SINGLE AUDIT REPORT
FOR THE YEAR ENDED
JUNE 30, 2006EXECUTIVE SUMMARY

The results of our single audit of the Commonwealth of Virginia for the year ended June 30, 2006, are
summarized below:

• we issued an unqualified opinion on the basic financial statements;

• we found certain matters that we consider reportable conditions; however, we do
not consider these to be material weaknesses;

• we did not identify instances of noncompliance with selected provisions of
applicable laws and regulations which could have a material effect on the basic
financial statements;

• we did find certain matters and instances of noncompliance with selected
provisions of laws and regulations related to major programs required to be
reported in accordance with OMB Circular A-133, Section .510(a). One of these
matters is identified as a material weakness in the internal control over major
program; and

• we issued an qualified opinion on the Commonwealth’s compliance with
requirements applicable to each major program.

Our audit findings are reported in the accompanying, “Schedule of Findings and Questioned Costs.”



- T A B L E O F C O N T E N T S -
Page

EXECUTIVE SUMMARY


INTRODUCTION LETTER 1


INDEPENDENT AUDITOR’S REPORTS:

Report on Internal Control over Financial Reporting and on Compliance and Other Matters
Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards 2- 3

Report on Compliance with Requirements Applicable to Each Major Program and on Internal
Control over Compliance in Accordance with OMB Circular A-133 4- 5


SCHEDULE OF FINDINGS AND QUESTIONED COSTS:

Summary of Auditor’s Results 6- 7

Risk Alerts 8- 9

Financial Statement Findings 10- 30

Federal Award Findings and Questioned Costs:

General Services Administration 30- 31

U.S. Department of Transportation 31
artment of Education 32- 36

U.S. Department of Health and Human Services 36- 45
artment of Veterans Affairs 45- 50

U.S. Department of Agriculture 50


AUDITOR’S COMMENTS ON RESOLUTION OF PRIOR YEAR AUDIT FINDINGS 51- 53


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS:

Independent Auditor’s Report on the Schedule of Expenditures of Federal Awards 54

Schedule of Expenditures of Federal Awards 55- 88

Notes to the Schedule of Expenditures of Federal Awards 89-99


APPENDIX:

Acronyms of Agencies and Institutions 100

State Agency Contact List for Audit Findings 101





March 16, 2007




The Honorable Timothy M. Kaine The Honorable Thomas K. Norment, Jr.
Governor of Virginia Chairman, Joint Legislative Audit
State Capitol and Review Commission
Richmond, Virginia General Assembly Building
Richmond, Virginia



We are pleased to submit the statewide Single Audit Report of the Commonwealth of Virginia for
the fiscal year ended June 30, 2006.

The Single Audit Report for the Commonwealth of Virginia discloses the Commonwealth’s
compliance with requirements applicable to major federal financial assistance programs. The statewide
Single Audit Report provides the General Assembly and agency management with a means to determine how
internal controls affect federal funds and whether agencies are complying with federal laws and regulations.

I would like to express my appreciation to the many individuals whose efforts assisted in preparing
this report. This report could not have been accomplished without the professionalism and dedication
demonstrated by the staff within this Office. We would like to recognize the agency and institution
management, and federal program and financial staffs for their cooperation and assistance in resolving single
audit issues.

We believe this report represents a significant indication of the sound fiscal operations of federal
funds in the Commonwealth. The report should greatly assist agency management in administering federal
programs and enhance their dealings with federal agencies.


AUDITOR OF PUBLIC ACCOUNTS


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INDEPENDENT AUDITOR’S REPORT

ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

We have audited the financial statements of the governmental activities, the business-type activities,
the aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of the Commonwealth of Virginia as of and for the year ended June 30, 2006, which collectively
comprise the Commonwealth’s basic financial statements and have issued our report thereon dated December
14, 2006. This report relates only to the Commonwealth and not to certain agencies and component units that
were audited by other auditors discussed in Note 1 of the “Notes to Financial Statements.” We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Commonwealth’s internal control over
financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions
on the financial statements and not to provide an opinion on the internal control over financial reporting.
However, we noted certain matters involving the internal control over financial reporting and its operation
that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation of the internal control over financial reporting
that, in our judgment, could adversely affect the Commonwealth’s ability to initiate, record, process, and
report financial data consistent with the assertions of management in the financial statements. Reportable
conditions are described in the accompanying “Schedule of Findings and Questioned Costs” as items 06-01
through 06-21.

A material weakness is a reportable condition in which the design or operation of one or more of the
internal control components does not reduce to a relatively low level the risk that misstatements caused by
error or fraud in amounts that would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal course of performing their
assigned functions. Our consideration of the internal control over financial reporting would not necessarily
disclose all matters in the internal control that might be reportable conditions and, accordingly, would not
necessarily disclose all reportable conditions that are also considered to be material weaknesses. However,
we believe that none of the reportable conditions described above is a material weakness.


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Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Commonwealth’s financial statements
are free of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.

We noted certain additional matters involving the internal control over financial reporting that were
not reportable conditions and immaterial instances on noncompliance that we have reported to the
management of the individual state agencies and institutions.

This report is intended solely for the information and use of the Governor and General Assembly of
Virginia, management, federal awarding agencies, and pass-through entities, and is not intended to be and
should not be used by anyone other than these specified parties. However, this report is a matter of public
record and its distribution is not limited.


AUDITOR OF PUBLIC ACCOUNTS
December 14, 2006
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REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH

MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE

IN ACCORDANCE WITH OMB CIRCULAR A-133

Compliance

We have audited the compliance of the Commonwealth of Virginia with the types of compliance
requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance
Supplement that are applicable to each of its major federal programs for the year ended June 30, 2006. The
Commonwealth’s major federal programs are identified in the “Summary of Auditor’s Results” section of the
accompanying “Schedule of Findings and Questioned Costs.” Compliance with the requirements of laws,
regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the
Commonwealth’s management. Our responsibility is to express an opinion on the Commonwealth’s
compliance based on our audit. This report relates only to the Commonwealth and not to the agencies and
component units that were audited by other auditors discussed in Note 1 of the “Notes to the Schedule of
Expenditures of Federal Awards.”

We conducted our audit of compliance in accordance with auditing standards generally accepted in
the United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require
that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the
types of compliance requirements referred to above that could have a direct and material effect on a major
program occurred. An audit includes examining, on a test basis, evidence about the Commonwealth’s
compliance with those requirements and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not
provide a legal determination of the Commonwealth’s compliance with those requirements.

As described in items 06-31 06-43 in the accompanying “Schedule of Findings and Questions Costs”,
the Commonwealth did not comply with requirements regarding reporting that are applicable to the Low-
Income Home Energy Assistance program, Temporary Assistance for Needy Families, Child Care and
Development Fund, and the State Administrative Matching Grants for Food Stamp program.. Compliance
with such requirements is necessary, in our opinion, for the Commonwealth to comply with the requirements
applicable to that program.

In our opinion, except for the noncompliance described in the preceding paragraph, the
Commonwealth complied, in all material respects, with the requirements referred to above that are applicable
to each of its major federal programs for the year ended June 30, 2006. The results of our auditing procedures
also disclosed instances on noncompliance with those requirements, which are required to be reported in
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accordance with OMB Circular A-133 and which are described in the accompanying “Schedule of Findings
and Questions Costs” as items 06-22 through 06-26, 06-29 through 06-32, 06-37 and 06-43.


Internal Control Over Compliance

The management of the Commonwealth is responsible for establishing and maintaining effective
internal control over compliance with the requirements of law, regulations, contracts, and grants applicable to
federal programs. In planning and performing our audit, we considered the Commonwealth’s internal control
over compliance with requirements that could have a direct and material effect on a major federal program in
order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to
test and report on the internal control over compliance in accordance with OMB Circular A-133.

We noted certain matters involving the internal control over compliance and its operation that we
consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating
to significant deficiencies in the design or operation of the internal control over compliance that, in our
judgment, could adversely affect the Commonwealth’s ability to administer a major federal program in
accordance with the applicable requirements of laws, regulations, contracts, and grants. These reportable
conditions are described in the accompanying “Schedule of Findings and Questioned Costs” as items 06-22
through 06-43.

A material weakness is a reportable condition in which the design or operation of one or more of the
internal control components does not reduce to a relatively low level the risk that noncompliance with the
applicable requirements of laws, regulations, contracts, and grants caused by error or fraud that would be
material in relation to a major federal program being audited may occur and not be detected within a timely
period by employees in the normal course of performing their assigned functions. Our consideration of the
internal control over compliance would not necessarily disclose all matters in the internal control that might
be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are
also considered to be material weaknesses. However, of the reportable conditions described above, we
consider 06-31 and 06-43 to be a material weakness.

This report is intended solely for the information and use of the Governor and General Assembly of
Virginia, management, federal awarding agencies and pass-through entities, and is not intended to be and
should not be used by anyone other than these specified parties. However, this report is a matter of public
record and its distribution is not limited.


AUDITOR OF PUBLIC ACCOUNTS
March 16, 2007

5 SUMMARY OF AUDITOR’S RESULTS
FOR THE YEAR ENDED JUNE 30, 2006

Financial Statements

Type of auditor’s report issued: Unqualified
Internal Control over financial reporting:
Material weakness identified? No
Reportable conditions identified not considered to be material weakness? Yes
Noncompliance material to financial statements noted? No

Federal Awards

Internal Control over financial reporting:
Material weakness identified? Yes idered to be material weakness? Yes
Type of auditor’s report issued on compliance for major programs: Qualified
Any audit findings disclosed that are required to be reported in accordance
with Circular A-133, Section .510(a)? Yes
The Commonwealth’s major programs are as follows:

CFDA Number(s) Name of Federal Program or Cluster
10.557 Special Supplemental Nutrition Program for Women, Infants, and Children
12.401 National Guard Military Operations and Maintenance (O&M) Projects
39.011, 90.401, 93.617 Election Reform Payments
64.005 Grants to States for Construction of State Home Facilities
66.468 Capitalization Grants for Drinking Water State Revolving Funds
84.010 Title I Grants to Local Education Agencies
84.048 Vocational Education-Basic Grants to States
84.224 Assistive Technology
84.357 Reading First State Grants
84.367 Improving Teacher Quality State Grants
93.268 Immunization Grants
93.558 Temporary Assistance for Needy Families (TANF)
93.563 Child Support Enforcement
93.568 Low-Income Home Energy Assistance
93.658 Foster Care-Title IV-E
93.659 Adoption Assistance
93.667 Social Services Block Grant (SSBG)
93.767 State Children’s Insurance Program
93.917 HIV Care Formula Grants
93.959 Treatment of Substance Abuse
10.551, 10.561 Food Stamp Cluster
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10.555, 10.553, 10.556,
10.559 Child Nutrition Cluster
20.205, 23.003 Highway Planning and Construction Cluster
20.500, 20.507 Federal Transit Cluster
84.007, 84.032, 84.033,
84.038, 84.063, 84.268,
93.342, 93.364, 93.925 Student Financial Assistance Cluster
84.027, 84.173 Special Education Cluster
93.044, 93.045, 93.053 Aging Cluster
93.596, 93.575 Child Care and Development Fund (CCDF) Cluster
93.778, 93.777, 93.775 Medicaid Cluster
Footnote 2A Research and Development Cluster

Dollar threshold used to distinguish between programs: Type A programs $21,804,260
Type B programs $ 2,180,426

Commonwealth qualified as low-risk auditee? No


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