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, and to include the updated federal requirements of 2 CFR Part 200, Uniform ...

 

DEPARTMENT OF FINANCIAL SERVICES

Division of Accounting and Auditing

RULE NOS.:RULE TITLES:

69I-5.001Applicability

69I-5.002Definitions

69I-5.003Format of Schedule

69I-5.004Types of State Financial Assistance

69I-5.005State Project Determination

69I-5.006Recipient/Subrecipient and Vendor Relationships

69I-5.007State Project Compliance Supplement

69I-5.008Criteria for Identifying Major State Projects

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

69I-5.010Approval of Non-State Entity Conduits

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, and to include the updated federal requirements of 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and its related Subpart F - Audit Requirements and Appendix XI, Compliance Supplement. The proposed amendment also updates the forms incorporated within Rule Chapter 69I-5, F.A.C., to include the above-mentioned changes.

SUMMARY: This rule chapter is being amended to reflect changes made to section 215.97, F.S., and the federal audit requirements, make editorial changes, and update the forms incorporated within the rule chapter.

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: This is a voluntary designation.

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), F.S.

LAW IMPLEMENTED: 215.97, F.S.

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: October 1, 2018  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-5.001 Applicability.

These rules apply to state agencies awarding state financial assistance,; recipients and subrecipients of state financial assistance,; and to independent auditors of state financial assistance. These rules are effective for fiscal years ending June 30, 2017, and thereafter.

Rulemaking Authority 215.97(4) FS. Law Implemented 215.97 FS. History–New 2-5-01, Formerly 3A-5.001, Amended     .

 

69I-5.002 Definitions.

(1) The terms in section 215.97(2), F.S., will shall have the same meanings when used in this rule chapter and are hereby incorporated by reference.

(2) “State agency” or “agency” as defined in section 216.011(1)(qq), F.S., has shall have the same meaning meanings when used in this rule chapter and is are hereby incorporated by reference.

Rulemaking Authority 215.97(4) FS. Law Implemented 215.97 FS. History–New 2-5-01, Formerly 3A-5.002, Amended     .

 

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:

(a) No change.

(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.

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

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

(e) and (f) 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-5.005 State Project Determination.

(1) State agencies must shall use the Form DFS-A2-PD, Florida Single Audit Act State Project Determination Checklist (Form DFS-A2-PD) (Rev. 6/18 eff. 7/05), to evaluate the applicability of the Florida Single Audit Act to a state program for inclusion in the CSFA Catalog of State Financial Assistance. The CSFA provides a compendium of state project information that can be accessed via the Department’s website at https://apps.fldfs.com/fsaa/catalog.aspx.

(2) State agencies must shall submit the completed Form DFS-A2-PD checklist to the Department of Financial Services, Bureau of Auditing, 200 East Gaines Street, Tallahassee, Florida 32399-0355. If the state program has been determined to be a state project, the state agency must shall also request a CSFA Catalog of State Financial Assistance number by completing and submitting to the Department an Form DFS-A2-AR, Agency Request Form for New CSFA Project Number (Form DFS-A2-AR) (Rev. 6/18 eff. 7/05).

(3) The Department will shall evaluate the request for a CSFA Catalog of State Financial Assistance number. If the request is approved, the Department will shall add the state project to the CSFA Catalog of State Financial Assistance.

(4) State agencies must shall annually be required to certify the accuracy and completeness of their its state projects included in the CSFA Catalog of State Financial Assistance by completing and submitting the Form DFS-A2-AC, Catalog of State Financial Assistance Agency Certification (Form DFS-A2-AC) (Rev. 6/18 eff. 7/05), to the Department.

(5) Copies of Forms DFS-A2-PD, DFS-A2-AR, and DFS-A2-AC, which are hereby incorporated by reference, can be obtained at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX, http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX, or http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX, respectively, or the Department’s website at http://www.myfloridacfo.com/Division/AA/Forms/default.htm

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

 

69I-5.006 Recipient, /Subrecipient, and Vendor Determinations Relationships.

(1) State awards expended by a recipient or /subrecipient are subject to audit under section 215.97, F.S., the “Florida Single Audit Act”.” Procurement contracts used to buy goods and services from vendors are outside the scope of the Act.

(2) The Form DFS-A2-NS, Florida Single Audit Act Checklist for Nonstate Non-State Organizations – Recipient/Subrecipient vs. Vendor Determination (DFS-A2-NS) (Rev. 6/18 eff. 7/05), must shall be used to determine the applicability of the Florida Single Audit Act to nonstate non-state organizations. State agencies, recipients, and subrecipients that provide state financial assistance to nonstate non-state organizations must shall complete Form DFS-A2-NS this form prior to execution of the applicable award document (e.g., contract, grant, agreement) and retain it in their records.

(3) Whenever a nonstate non-state organization is determined to be a recipient or subrecipient of state or federal financial assistance, the applicable audit requirements referenced in standard audit language contained on Form DFS-A2-CL, Audit Requirements for Awards of State and Federal Financial Assistance (Rev. 6/18 Effective 7/05), including 2 CFR Part 200, and its related Subpart F-Audit Requirements and Appendix XI, Compliance Supplement, which are hereby incorporated by reference, must be included in the document that establishes the sState’s, recipient’s, or subrecipient’s relationship with the nonstate non-state entity.

(4) Copies of 2 CFR Part 200, and its related Subpart F-Audit Requirements and Appendix XI, Compliance Supplement, and Forms DFS-A2-NS and DFS-A2-CL, which are hereby incorporated by reference, may be obtained at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX, http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX, http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX, respectively, or the Department’s website at http://www.myfloridacfo.com/Division/AA/Forms/default.htm

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

 

69I-5.007 State Projects Project Compliance Supplement.

(1) State awarding agencies, in consultation with the Department, must shall evaluate their its state projects for inclusion in the State Projects Project Compliance Supplement. The State Projects Compliance Supplement can be accessed via the Department’s website at https://apps.fldfs.com/fsaa/compliance.aspx.

(2) State awarding agencies must shall complete and submit to the Department the Form DFS-A2-CS, Agency Reporting Form for the State Projects Project Compliance Supplement (Form DFS-A2-CS) (Rev. 6/18 Effective 7/05), for each state project to be included in the State Projects Project Compliance Supplement.

(3) A copy of Form DFS-A2-CS, which is hereby incorporated by reference, may be obtained at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or the Department’s website at http://www.myfloridacfo.com/Division/AA/Forms/default.htm

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     .

 

69I-5.010 Approval of Nonstate Non-State Entity Conduits.

The state awarding agency and the Department must approve a nonstate non-state entity’s status as a conduit of state financial assistance.

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