Commonwealth of Virginia Single Audit Report for the Year Ended June 30, 2008
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Commonwealth of Virginia Single Audit Report for the Year Ended June 30, 2008

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COMMONWEALTH OF VIRGINIASINGLE AUDIT REPORTREPORTFOR THE YEAR ENDEDJUNE 30, 2008EXECUTIVE SUMMARY The results of our single audit of the Commonwealth of Virginia for the year ended June 30, 2008, are summarized below: • we issued an unqualified opinion on the basic financial statements; • we found certain matters that we consider significant deficiencies; however, we do not consider these to be material weaknesses; • we identified instances of noncompliance with selected provisions of applicable laws and regulations which could have a material effect on the basic financial statements; • we found 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); and • we issued an unqualified 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 2- 3 Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to Each Major ...

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COMMONWEALTH OF VIRGINIA
SINGLE AUDIT REPORTREPORT
FOR THE YEAR ENDED
JUNE 30, 2008EXECUTIVE SUMMARY


The results of our single audit of the Commonwealth of Virginia for the year ended June 30, 2008, are
summarized below:

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

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

• we identified instances of noncompliance with selected provisions of applicable
laws and regulations which could have a material effect on the basic financial
statements;

• we found 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); and

• we issued an unqualified 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 2- 3
Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards

Report on Compliance with Requirements Applicable to Each Major Program, on Internal 4- 6
Control over Compliance in Accordance with OMB Circular A-133, and on the Schedule
of Expenditures of Federal Awards


SCHEDULE OF FINDINGS AND QUESTIONED COSTS:

Summary of Auditor’s Results 7-8

Financial Statement Findings 9-45

Federal Award Findings and Questioned Costs:

U.S. Department of Agriculture 46

U.S. Department of Education 47-53

U.S. Department of Health and Human Services 54-63
U.S. Department of Homeland Security 64-67


AUDITOR’S COMMENTS ON RESOLUTION OF PRIOR YEAR AUDIT FINDINGS 68-72


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS:

Schedule of Expenditures of Federal Awards 73-117

Notes to the Schedule of Expenditures of Federal Awards 118-127


APPENDIX:

Acronyms of Agencies and Institutions 128

State Agency Contact List for Audit Findings 129

January 28, 2009




The Honorable Timothy M. Kaine The Honorable M. Kirkland Cox
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, 2008.

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, 2008, which collectively
comprise the Commonwealth’s basic financial statements and have issued our report thereon dated December
12, 2008. Our report was modified to include a reference to other auditors. 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. Other auditors audited the financial statements of certain component units of
the Commonwealth as described in our report on the Commonwealth’s financial statements and Note 1.B. to
the financial statements. This report does not include the results of the other auditors’ testing of internal
control over financial reporting or compliance and other matters that are reported on separately by those
auditors. The financial statements of the Hampton Roads Sanitation District Commission, Virginia Museum
of Fine Arts Foundation, Library of Virginia Foundation, and Danville Science Center, Inc., which were
audited by other auditors upon whose reports we are relying, were audited in accordance with auditing
standards generally accepted in the United States of America, but not in accordance with Government
Auditing Standards.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Commonwealth’s internal control over
financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion
on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
Commonwealth’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the Commonwealth’s internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described in
the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial
reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we
identified certain deficiencies in internal control over financial reporting that we consider to be significant
deficiencies.

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A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on
a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that
adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in
accordance with generally accepted accounting principles such that there is more than a remote likelihood that
a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or
detected by the entity’s internal control over financial reporting. We consider the deficiencies described in
the accompanying “Schedule of Findings and Questioned Costs” as items 08-01 through 08-42, 08-45 through
08-48, and 08-50 through 08-60 to be significant deficiencies in internal control over financial reporting.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the financial statements will not be prevented
or detected by the entity’s internal control.

Our consideration of the internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and would not necessarily identify all deficiencies in the
internal control over financial reporting that might be significant deficiencies and, accordingly, would not
necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However,
we believe that none of the significant deficiencies described above is a material weakness.

Compliance and Other Matters

As a part of obtaining reasonable assurance about whether the Commonwealth’s financial statements
are free from 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 instances of noncompliance or other matters that are required to be reported
under Government Auditing Standards and which are described in the accompanying “Schedule of Findings
and Questioned Costs” as items 08-01, 08-36, 08-45 through 08-48, and 08-50 through 08-60.

We noted certain additional matters involving internal control over financial reporting and immaterial
instances of noncompliance that we have reported to the management of the individual state agencies and
institutions.

The Commonwealth’s response to the findings identified in our audit are described in the
accompanying “Schedule of Findings and Questioned Costs.” We did not audit the Commonwealth’s
response and, accordingly, we express no opinion on it.

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 agencies, 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 should not be limited.



AUDITOR OF PUBLIC ACCOUNTS
December 12, 2008
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REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH

MAJOR PROGRAM, ON INTERNAL CONTROL OVER COMPLIANCE

IN ACCORDANCE WITH OMB CIRCULAR A-133, AND

ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

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, 2008. 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.

In our opinion, 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, 2008. However,
the results of our auditing procedures disclosed instances of noncompliance with those requirements, which
are required to be reported in accordance with OMB Circular A-133 and which are described in the
accompanying “Schedule of Findings and Questions Costs” as items 08-36, 08-43 through 08-48, and 08-50
through 08-62.

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Internal Control Over Compliance

The management of the Commonwealth is responsible for establishing and maintaining effective
internal control over compliance with the requirements of laws, 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, but not for the purpose of expressing an opinion on the effectiveness of internal controls over
compliance. Accordingly, we do not express an opinion on the effectiveness of the Commonwealth’s internal
control over compliance.

Our consideration of internal control over compliance was for the limited purpose described in the
preceding paragraph and would not necessarily identify all deficiencies in the entity’s internal control that
might be significant deficiencies or material weaknesses as defined below. However, as discussed below, we
identified certain deficiencies in internal control over compliance that we consider to be significant
deficiencies.

A control deficiency in an entity’s internal control over compliance exists when the design or
operation of a control does not allow management or employees, in the normal course of performing their
assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal
program on a timely basis. A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the entity’s ability to administer a federal program such that there is more
than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that
is more than inconsequential will not be prevented or detected by the entity’s internal control. We consider
the deficiencies in internal control over compliance described in the accompanying “Schedule of Findings and
Questioned Costs” as items 08-36 and 08-42 through 08-63 to be significant deficiencies.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that material noncompliance with a type of compliance requirement of a
federal program will not be prevented or detected by the entity’s internal control. We did not consider any of
the deficiencies described in the accompanying “Schedule of Findings and Questioned Costs” to be material
weaknesses.

Schedule of Expenditures of Federal Awards

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 as of and for the year ended June 30, 2008, and have issued our report
thereon dated December 12, 2008. Our audit was performed for the purpose of forming our opinions on the
financial statements that collectively comprise the Commonwealth’s basic financial statements. The
accompanying “Schedule of Expenditures of Federal Awards” is presented for purposes of additional analysis
as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken
as a whole.

The Commonwealth’s responses to the findings identified in our audit are described in the
accompanying “Schedule of Findings and Questioned Costs.” We did not audit the Commonwealth’s
responses and, accordingly, we express no opinion on them.

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 agencies, and is not intended to be and
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should not be used by anyone other than these specified parties. However, this report is a matter of public
record and its distribution should not be limited.



AUDITOR OF PUBLIC ACCOUNTS
January 28, 2009 (except as related to the Report on
the Schedule of Expenditures of Federal Awards,
as to which the date is December 12, 2008)
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SUMMARY OF AUDITOR’S RESULTS
FOR THE YEAR ENDED JUNE 30, 2008

Financial Statements

Type of auditor’s report issued: Unqualified
Internal control over financial reporting:
Material weakness identified? No
Significant deficiencies identified not considered to be material weaknesses? Yes
Noncompliance material to financial statements noted? Yes

Federal Awards

Internal Control over major programs:
Material weakness identified? No Significant deficiencies identified not considered to be material weaknesses? Yes
Type of auditor’s report issued on compliance for major programs: Unqualified
Any audit findings disclosed that are required to be reported in accordance
with section 510(a) of OMB Circular A-133? 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
10.551, 10.561 Food Stamp Cluster
17.207, 17.801, 17.804 Employment Service Cluster
17.258, 17.259, 17.260 WIA Cluster
20.607 Alcohol Open Container Requirements
20.205 Highway Planning and Construction Cluster
39.003 Donation of Federal Surplus Personal Property
84.126 Rehabilitation Services
93.268 Immunization Grants
93.283 Center for Disease Control and Prevention
93.558 Temporary Assistance for Needy Families
93.563 Child Support Enforcement
93.568 Low-Income Home Energy Assistance
93.658 Foster Care-Title IV-E
93.667 Social Services Block Grant
93.917 HIV Care Formula Grants
93.959 Block Grants for Prevention and Treatment of Substance Abuse
93.044, 93.045, 93.053 Aging Cluster
93.575, 93.596 CCDF Cluster
93.775, 93.777, 93.778 Medicaid Cluster
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