Summary

Scope

As a condition of receiving Federal funds, the U.S. Office of Management and Budget (OMB) requires, as described in OMB Circular A‑133, an audit of the State’s financial statements and Federal awards programs.  Pursuant to Section 11.45, Florida Statutes, we conducted an audit of the basic financial statements of the State of Florida as of and for the fiscal year ended June 30, 2007.  We also subjected supplementary information contained in the State’s Comprehensive Annual Financial Report and the State’s Schedule of Expenditures of Federal Awards to auditing procedures applied in our audit of the basic financial statements.  Additionally, we audited the State’s compliance with governing requirements for 41 Federal awards programs or program clusters that we identified as major programs for the fiscal year ended June 30, 2007. 

Summary of Report on Financial Statements

The State of Florida’s basic financial statements, as of and for the fiscal year ended June 30, 2007, were fairly presented in all material respects, in accordance with accounting principles generally accepted in the United States.  Our report is included in the Florida Comprehensive Annual Financial Report for fiscal year ended June 30, 2007, 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

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 significant deficiencies: 

Ø For one or more financial statement accounts, the Departments of Financial Services, Management Services, Environmental Protection, and Transportation did not accurately report or classify assets, net assets, or liabilities in accordance with general accepted accounting principles.  (Finding Nos. FS 07-001, FS 07-002, FS 07-003, FS 07-004, FS 07-006, FS 07-007, and FS 07-008)

Ø The State Board of Administration did not always timely and properly administer procedures designed to measure compliance with Rule 2a-7 requirements and related Investment Policy Guidelines and did not always document decisions related to management of the Local Government Surplus Funds Trust Fund Investment Pool.  (Finding No. FS 07-005)

Ø Board of Governors and Department of Education procedures for reviewing and compiling State universities’ and community colleges’ financial information submitted to the Department of Financial Services did not always ensure that such information was timely, accurate, and complete.  Such information is included in the State’s basic financial statements and the Schedule of Expenditures of Federal Awards. (Finding No. FS 07-009)

Ø The Agency for Health Care Administration and the Departments of Children and Family Services, Community Affairs, Education, and Environmental Protection procedures for preparing the Schedule of Expenditures of Federal Awards did not include a reconciliation to the financial statements or the underlying financial system (FLAIR) from which the financial statements were prepared.  Additionally, errors were noted in the amount of expenditures reported for some programs.  (Finding Nos. FS 07-010 and FS 07-011)

We believe that none of the significant deficiencies described above is a material weakness.

As an additional matter, we also noted that the Department of Management Services used a long-term investment rate assumption in determining the actuarial accrued liability for the Health Insurance Subsidy Pension plan that was not commensurate with the nature and mix of current and expected plan investments.  The actuarial accrued liability is reported as required supplementary information to the basic financial statements.  (Finding No. FS 07-012)

Compliance

The results of our audit of the State’s basic financial statements disclosed no instances of noncompliance that are required to be reported by Government Auditing Standards.

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

During the 2006-07 fiscal year, State agencies, universities, and community colleges administered over 550 Federal awards programs or program clusters.  Expenditures for the 41 major programs totaled $21.4 billion, or approximately 94 percent of the total expenditures of $22.8 billion, as reported on the Supplementary Schedule of Expenditures of Federal Awards.

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.

Ø The Department of Agriculture and Consumer Services did not always obtain required semiannual certifications for employees who worked solely on the Plant and Animal Disease, Pest Control, and Animal Care Program.  (Finding No. FA 07-001)

Ø The Department of Education used moneys set aside for Immigrant Children and Youth under the English Language Acquisition Grants Program for other Program purposes.  (Finding No. FA 07-040)

Ø The Department of Children and Family Services did not document, in a substantial number of instances, the eligibility of clients receiving benefits under the Adoption Assistance Program.  (Finding No. FA 07‑056)

Ø 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 07-074)

Ø The Department of Community Affairs and the Division of Emergency Management did not adequately document the appropriateness of subgrantee reimbursements under the Hazard Mitigation Grant Program.  (Finding No. FA 07-076)

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 significant deficiencies.  Significant deficiencies are described in the Schedule of Findings and Questioned Costs and pertained 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.  The findings described in the previous paragraphs on compliance for the Plant and Animal Disease, Pest Control, and Animal Care Program (Finding No. FA 07‑001), the English Language Acquisition Grants Program (Finding No. FA 07-040); Adoption Assistance Program (Finding No. FA 07-056); Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program (Finding No. FA 07-074); and Hazard Mitigation Grant Program (Finding No. FA 07-076) involved material weaknesses in internal control.  The following significant deficiencies were also considered material weaknesses:

Ø The Department of Community Affairs did not have appropriate controls in place over systems used to process payments and administer the Community Development Block Grant Program.  (Finding No. FA 07-006)

Ø Procedures implemented by the Department of Children and Family Services for the Medicaid Cluster were not adequate to document that data exchanges had been performed or that the results were timely processed.  (Finding No. FA 07-061)

Ø The Department of Community Affairs did not have adequate procedures in place to ensure that access to the State’s accounting system was appropriate.  This weakness affected all five of the Department’s major programs.  (Finding No. FA 07-066)

Schedule of Expenditures of Federal Awards

The State’s Supplementary Schedule of Expenditures of Federal Awards (SEFA) is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the State’s basic financial statements.  The State’s SEFA does not include the State’s blended component units, Workforce Florida, Inc., and Scripps Florida Funding Corporation; 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.  Information on the schedule is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 

Objectives

The objectives of our audit were:

Ø The expression of opinions concerning whether the State’s basic financial statements were presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States. 

Ø The expression of an opinion concerning whether the State’s Schedule of Expenditures of Federal Awards is presented fairly, in all material respects, in relation to the State’s basic financial statements taken as a whole.

Ø To obtain an understanding of the internal control over compliance for each major Federal program, assess the control risk, and perform tests of controls, unless the controls were deemed to be ineffective. 

Ø The expression of opinions concerning whether the State complied, in all material respects, with laws, regulations, and the provisions of contracts or grant agreements pertaining to Federal awards that may have a direct and material effect applicable to each of the major Federal programs.

Methodology

We conducted our audit in accordance with auditing standards generally accepted in the United States; applicable standards contained in Government Auditing Standards issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and related guidance provided by OMB Circular A-133. 

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.