The purpose of the proposed amendments to Rule Chapter 69I-5, F.A.C., is to implement the legislative changes made to section 215.97, F.S., the Florida Single Audit Act.

 

DEPARTMENT OF FINANCIAL SERVICES

Division of Accounting and Auditing

RULE NOS.:RULE TITLES:

69I-5.003Format of Schedule

69I-5.004Types of State Financial Assistance

69I-5.008Criteria for Identifying Major State Projects

69I-5.009Criteria for Selecting State Projects for Audits Based on Inherent Risk

PURPOSE AND EFFECT: The purpose of the proposed amendments to Rule Chapter 69I-5, F.A.C., is to implement the legislative changes made to section 215.97, F.S., the Florida Single Audit Act.

SUMMARY: This rule chapter is being amended to reflect changes made to section 215.97, F.S., as well as the federal audit requirements regarding expenditures of state awards.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: The Agency conducted an economic analysis of the potential impact of the proposed rule amendments and determined that there will be no adverse economic impact or regulatory increases that would require legislative ratification.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 215.97(4)(a), FS.

LAW IMPLEMENTED: 215.97, FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE,TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: January 8, 2019 1:30 p.m.

PLACE: J. Edwin Larson Building, Room 116, 200 East Gaines Street, Tallahassee, FL 32399

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Mark Merry, telephone: [phone], email: [e-mail].. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Mark Merry, Assistant Division Director, Division of Accounting and Auditing, Department of Financial Services, address: 200 East Gaines Street, Tallahassee, FL 32399-0393, telephone: [phone], email: [e-mail].

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69I-5.003 Schedule of Expenditures of State Financial Assistance Format of Schedule.

(1) A nonstate entity that receives or expends state financial assistance must, for the period covered by the entity’s financial statements, prepare a Schedule of Expenditures of State Financial Assistance. If a nonstate entity also expends federal awards, the entity may, after considering federal presentation requirements, present the expenditures of state financial assistance and federal awards on combined or separate schedules. The Schedule of Expenditures of State Financial Assistance shall be included on the non-state entity’s Schedule of Expenditures of Federal Awards and State Financial Assistance. If a non-state entity does not receive federal financial assistance, a Schedule of Expenditures of State Financial Assistance shall be prepared. At a minimum, the Schedule of Expenditures of State Financial Assistance shall be prepared. At a minimum, the Schedule of Expenditures of State Financial Assistance must shall:

(1)(a) No change.

(2)(b) For state financial assistance received as a subrecipient, list the name of the pass-through entity and the identifying contract or /grant number assigned by the pass-through entity.

(3)(c) Provide the total state financial assistance expended for each individual state project and the Catalog of State Financial Assistance (CSFA) number.

(4)(d) Provide the total state financial assistance transferred to subrecipients for each state project.

(e) through (f) renumbered (5) through (6) No change.

(2) The Schedule of Expenditures of Federal Awards and State Financial Assistance shall be in a format similar to the sample presented below:

NAME OF NON-STATE ENTITY

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

AND STATE FINANCIAL ASSISTANCE

For the Fiscal Year Ended Month/Date/Year

Federal/State Agency,	CFDA	Contract		Transfers to
Pass-through Entity	CSFA	Grant	Expenditures	Subrecipients
Federal Program/State Project	No.	No.	(in thousands)	(in thousands)
FEDERAL AGENCY NAME
Direct Programs
XXXXX	XXXXX*	XXXXX	XXXXX	XXXXX
Indirect Programs
Passed through (insert name of entity)
XXXXX	XXXXX	XXXXX	XXXXX	XXXXX
TOTAL FEDERAL AGENCY			XXXXX	XXXXX
TOTAL EXPENDITURES OF FEDERAL AWARDS			XXXXX	XXXXX
STATE AGENCY NAME
Direct Projects
XXXXX	XXXXX*	XXXXX	XXXXX	XXXXX
Indirect Projects
Passed through (insert name of entity)
XXXXXX	XXXXX	XXXXX	XXXXX	XXXXX
TOTAL STATE AGENCY			XXXXX	XXXXX
TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE *denotes major program/project			XXXXX	XXXXX

Rulemaking Authority 215.97(4) FS. Law Implemented 215.97 FS. History–New 2-5-01, Formerly 3A-5.003, Amended 11-1-05,        .

 

69I-5.004 Types of State Financial Assistance.

(1) State financial assistance is financial assistance from state resources provided to nonstate entities non-state organizations to carry out a state project. It does not include federal financial assistance and state matching provided by state agencies for federal programs. State financial assistance must shall be categorized by the following classes or types of financial assistance:

(a) No change.

(b) Direct Appropriations – Financial assistance appropriated to state agencies to be provided directly to specified nonstate non-state entities per legislative proviso to encourage or subsidize particular activities.

(c) through (k) No change.

(2) The following provisions are to be used in determining state financial assistance expended:.

(a) The determination of when state financial assistance is expended should be based on when the related activity occurs. Generally, the activity pertains to events that require the nonstate entity non-state organization to comply with laws, rules, and the provisions of contracts or grant agreements such as: expenditure and /expense transactions associated with grants, cooperative agreements, and direct appropriations; the disbursement of funds passed through to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property or food commodities; the receipt of tax refunds; the application of tax credits against tax liabilities; and the period when insurance is in force.

(b) Loans and Loan Guarantees. Since the state is at risk for loans until the debt is repaid, the value of the state financial assistance expended under loan programs should include the value of new loans made or received during the nonstate entity’s non-state organization’s fiscal year; plus the balance of loans from previous years for which the state imposes continuing compliance requirements; plus any interest subsidy, cash, or administrative cost allowance received. Prior loans and loan guarantees, the proceeds of which were received and expended in prior years, are not considered state financial assistance expended when the laws, rules, and provisions of contracts or grant agreements pertaining to such loans impose no continuing compliance requirements other than to repay the loans.

(c) No change.

Rulemaking Authority 215.97(4) FS. Law Implemented 215.97 FS. History–New 11-1-05, Amended        .

 

69I-5.008 Criteria for Identifying Major State Projects.

(1) The independent auditor must shall use a risk-based approach to determine which state projects are major state projects. This risk-based approach must shall include consideration of the amount of state project expenditures and the inherent risk of the state project. The process as determined in accordance with section 215.97(2)(a), F.S., and enumerated in subsections (2) through (6) below must shall be followed.

(2) The independent auditor must shall identify the larger state projects as Type A Projects according to the following criteria:

(a) For auditees with expenditures of state awards between $750,000 $300,000 and $2,500,000 $1,000,000, Type A Projects are defined as the larger of $300,000 $100,000 or thirty percent (30%) of total state awards expended.

(b) For auditees with expenditures of state awards exceeding $2,500,000 $1,000,000, Type A Projects are defined as the larger of $750,000 $300,000 or three percent (3%) of total state awards expended.

(3) State projects not identified as Type A Projects must shall be considered Type B Projects.

(4) The independent auditor must shall identify Type A Projects which are low-risk. For a Type A Project to be considered low-risk, it should have been audited as a major state project in at least one of the two most recent audit periods and, in the most recent audit period, it should have had no reportable audit findings. The auditor must shall consider the criteria enumerated in Rule 69I-5.009, F.A.C., the results of audit follow-up, and any significant changes in personnel or systems affecting a Type A Project, in applying professional judgment in determining whether a Type A Project is low-risk.

(5) The independent auditor must shall identify Type B Projects which are high-risk. The auditor must shall consider the criteria enumerated in Rrule 69I-5.009, F.A.C., in applying professional judgment in determining whether a Type B Project is high-risk. However, the independent auditor is not expected to perform risk assessments on relatively small state projects. Therefore, the auditor is only required to perform risk assessments on Type B Projects as follows:

(a) For auditees with expenditures of state awards of $750,000 $300,000 to $2,500,000 $1,000,000, risk assessments will shall be required for Type B Projects that exceed the larger of $100,000 $50,000 or ten percent (10%) of total state awards expended.

(b) For auditees with expenditures of state awards that exceed $2,500,000 $1,000,000, risk assessments will shall be required for Type B Projects that exceed the larger of $250,000  $100,000 or one percent (1%) of total state awards expended.

(6) At a minimum, the independent auditor must shall audit all of the following as major projects:

(a) and (b) No change.

(c) Additional projects as may be necessary to provide audit coverage of at least fifty percent (50%) of the auditee’s expenditures of state awards. Wherever practicable, additional projects should be selected in accordance with the criteria enumerated in Rrule 69I-5.009, F.A.C.

Rulemaking Authority 215.97(4) FS. Law Implemented 215.97 FS. History–New 11-1-05, Amended        .

 

69I-5.009 Criteria for Selecting State Projects for Audits Based on Inherent Risk.

(1) The independent auditor’s selection of state projects for audit must shall be based on an overall analysis and evaluation of the risk of noncompliance occurring which could be material to the state project. The auditor must, consistent with applicable governmental auditing standards, shall use professional judgment and consider criteria, such as enumerated described in subsections (2) through (4), below, to identify risk in state projects. Also, as part of the risk analysis, the auditor may wish to discuss a particular state project with auditee management and the awarding state agency.

(2) The independent auditor must shall consider current and prior audit experience.

(a) Weakness in internal controls over state financial assistance would indicate higher risk. Consideration should be given to the control environment over state financial assistance and such factors as the expectation of management’s adherence to applicable laws, rules, and contract or /grant provisions, and the competence and experience of personnel who administer the state financial assistance project.

(b) and (c) No change.

(3) The independent auditor must shall consider the extent of any oversight exercised by the state agencies and the results of any monitoring performed.

(4) When evaluating state projects, independent auditors must shall consider the inherent risk of the project, which includes the following:

(a) through (d) No change.

(5) The independent auditor must shall document in the working papers the risk analysis process used in determining major projects. State agencies may provide auditors guidance about the risk of a particular state project and the auditor must shall consider this guidance in determining major projects in audits not yet substantially completed.

Rulemaking Authority 215.97(4) FS. Law Implemented 215.97 FS. History–New 11-1-05, Amended        .

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Mark Merry, Assistant Division Director, Division of Accounting and Auditing, Department of Financial Services

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Jimmy Patronis, Chief Financial Officer, Department of Financial Services

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: September 5, 2018

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: June 22, 2018