As a condition of receiving Federal funds, the U.S. Office of Management and Budget (OMB) requires an audit of the State’s financial statements and Federal awards programs as described in OMB Circular A‑133.  The audit of the State’s financial statements, performed in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, culminates in an Independent Auditor’s Report and a Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards.  The audit of the State-administered Federal awards programs results in a Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133. 

Summary of Independent Auditor’s Report

Our report on the State’s financial statements for the fiscal year ended June 30, 2006, is included in the Florida Comprehensive Annual Financial Report issued by the Chief Financial Officer.  

Summary of Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of the Financial Statements Performed
in Accordance with Government Auditing Standards

Compliance

The results of our audit disclosed no instances of noncompliance that are required to be reported by Government Auditing Standards.

Internal Control Over Financial Reporting

We noted the following matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions:

Ø      Department of Environmental Protection records of the Board of Trustess of the Internal Improvement Trust Fund were not adequate to document the ownership and valuation of a substantial portion of the balance disclosed for governmental activities, land and other nondepreciable assets, in note 5 to the financial statements, and reported for net capital assets at June 30, 2006.  This was considered to be a material weakness in internal control.  (Finding No. FS 06-001) 

Ø      Department of Financial Services, Statewide Financial Reporting Section, written procedures relating to the reconciliation and elimination of interfund balances and transfers were not sufficiently detailed to identify all information necessary to properly report or eliminate such accounts.  (Finding No. FS 06-002)

Ø      Florida’s Turnpike Enterprise controls were not adequate to ensure the reporting of accounts payable in the correct fiscal year.  (Finding No. FS 06-003)

Ø      Department of Education procedures were not adequate for converting State university and community college financial statement accounts to accounts used for the State’s financial statements and for reviewing information for accuracy and completeness prior to submission to the Department of Financial Services, Statewide Financial Reporting Section, for inclusion in the State’s financial statements and Schedule of Expenditures of Federal Awards. (Finding No. FS 06-004)

Other internal control matters, which are of lesser significance than reportable conditions, were noted regarding financial reporting accuracy and presentation at the Agency for Workforce Innovation; the Departments of Management Services, Financial Services, and Revenue; and Florida’s Turnpike Enterprise.  Additionally, other internal control matters were noted regarding safeguarding of assets at Florida’s Turnpike Enterprise and accuracy and presentation of Schedules of Expenditures of Federal Awards at five State universities.

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

Compliance

Except as described in the following paragraphs, the State of Florida complied, in all material respects, with the compliance requirements applicable to each of its major Federal awards programs.

We were not able to audit compliance with requirements applicable to Special Tests and Provisions for the Plant and Animal Disease, Pest Control, and Animal Control Program because the Department of Agriculture and Consumer Services did not maintain citrus canker records in a manner that facilitated reasonable access to assess compliance with required enforcement procedures.  (Finding No. FA 06-001)

We were also not able to audit compliance with requirements applicable to Matching, Level of Effort, and Earmarking and Reporting for the Vocational Education – Basic Grants to States Program because the Department of Education did not provide, during our period of field work, the Interim or Final Financial Status Report or documentation supporting compliance with matching and level of effort requirements.  (Finding No. FA 06-027)

The Department of Children and Family Services did not document, in a substantial number of instances, the eligibility of clients or providers to receive benefits under the Temporary Assistance for Needy Families Program (Finding No. FA 06‑050), Refugee and Entrant Assistance – State Administered Programs (Finding No. FA 06‑053), and Foster Care – Title IV‑E Program (Finding No. FA 06-056).

The Department of Health did not document, in a substantial number of instances, the eligibility of clients to receive AIDS Drug Assistance under the HIV Care Formula Grants Program.  (Finding No. FA 06-067)

The Department of Community Affairs and the Division of Emergency Management did not adequately review subrecipient requests for reimbursement under the Hazard Mitigation Grant Program prior to approval and payment.  (Finding No. FA 06-079)

The results of our audit also disclosed other instances of noncompliance pertaining to various programs administered by various State agencies, universities, and community colleges.  Some of the instances of noncompliance, primarily those pertaining to the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility compliance requirements, resulted in questioned costs subject to disallowance by the grantor agency.  Other instances pertained to various compliance requirements including, but not limited to, Matching, Level of Effort, and Earmarking; Subrecipient Monitoring; and Special Tests and Provisions.  Instances of noncompliance are described in the Schedule of Findings and Questioned Costs. 

Internal Controls Over Compliance

We noted numerous matters at various State agencies, universities, and community colleges involving internal control over compliance and its operation that we consider to be reportable conditions.  These conditions pertain to various compliance requirements including, but not limited to, Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting, Subrecipient Monitoring, and Special Tests and Provisions.  Reportable conditions are described in the Schedule of Findings and Questioned Costs.  The findings described in the previous paragraphs on compliance for the Plant and Animal Disease, Pest Control, and Animal Care Program (Finding No. FA 06-001); Vocational Education – Basic Grants to States Program (Finding No. FA 06-027); Temporary Assistance for Needy Families Program (Finding No. FA 06-050); Foster Care – Title IV-E Program (Finding No. FA 06-056); and HIV Care Formula Grants Program (Finding No. 06‑067) were considered material weaknesses in internal control.  The following reportable conditions were also considered material weaknesses:

Procedures implemented by the Department of Health for the Special Education – Grants for Infants and Families with Disabilities Program (Finding No. FA 06-033) and the Agency for Workforce Innovation for the Child Care Cluster Programs (Finding No. FA 06‑055) were not adequate to ensure timely and effective monitoring of subrecipients.

The Division of Emergency Management had not implemented procedures to ensure the timely completion of final inspections of large projects for the Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program.  (Finding No. FA 06-078)

Schedule of Expenditures of Federal Awards

The accompanying Schedule of Expenditures of Federal Awards for the fiscal year ended June 30, 2006, is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the State of Florida’s basic financial statements.  However, information in the Schedule of Expenditures of Federal Awards 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.

Audit Scope

During the 2005-06 fiscal year, State agencies, universities, and community colleges administered over 625 Federal awards programs or program clusters.  We audited the State’s compliance with governing requirements for 41 of the Federal awards programs or program clusters that we identified as major programs for the fiscal year ended June 30, 2006.  Expenditures for the major programs totaled approximately $21.1 billion, or 88 percent of the total expenditures of $23.9 billion, as reported on the Schedule of Expenditures of Federal Awards.

Our audit of Federal awards programs for the fiscal year ended June 30, 2006, did not include the administration of Federal awards programs by Scripps Florida Funding Corporation and Workforce Florida, Inc., blended component units of the State; discretely presented component units of the State’s universities and community colleges; or discretely presented component units other than the State’s universities and community colleges.  As applicable, Federal awards programs administered by the component units excluded from our audit, as well as other governmental units and nonprofit organizations that receive Federal funds through the State, are subject to audits by other auditors.

Audit Methodology

Our audit was conducted 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.

Auditor's Reports

Financial Statements Findings

Federal Findings and Questioned Costs

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS

Part A - State Agencies

Part B - State Universities

Part C - State Community Colleges

Written responses from the State agencies, universities, and community colleges to our findings and recommendations are included within the audit report which can be viewed on the Auditor General Web site.