Summary
| Report Number: | 2009-144 |
| Report Title: | State of Florida - Compliance and Internal Controls Over Financial Reporting and Federal Awards |
| Report Period: | 07/01/2007 - 06/30/2008 |
| Release Date: | 03/05/2009 |
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 major 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, 2008. 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 the Federal awards programs or program clusters that we identified as major programs for the fiscal year ended June 30, 2008.
Summary of Report on Financial Statements
The State of Florida’s basic financial statements, as of and for the fiscal year ended June 30, 2008, 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, 2008, issued by the Chief Financial Officer.
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:
Ř For one or more financial statement accounts, the Departments of Revenue and Management Services and the Agency for Health Care Administration did not accurately report or classify assets, net assets, revenues, expenses, or liabilities in accordance with generally accepted accounting principles. (Finding Nos. FS 08-001, FS 08-002, FS 08-003, and FS 08-004)
We believe that none of the significant deficiencies described above is a material weakness.
We noted additional matters that were reported to management but that we did not consider to be significant deficiencies or material weaknesses.
Ř The Department of Financial Services used a standard form to obtain from State entities the information needed to compile amounts disclosed in Note 2 regarding deposits and related custodial credit risk. These forms did not require the entities to certify compliance with Chapter 280, Florida Statutes, which governs the collateralization of State deposits. (Finding No. FS 08-005)
Ř The Department of Financial Services did not have effective IT general controls in place to ensure the integrity and reliability of data relating to Special Disability Trust Fund claims. (Finding No. FS 08-006)
Ř 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 08-007)
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.
During the 2007-08 fiscal year, State agencies, universities, and community colleges administered over 540 Federal awards programs or program clusters. Expenditures for the 39 major programs totaled $21.5 billion, or approximately 88 percent of the total expenditures of $24.5 billion, as reported on the Supplementary Schedule of Expenditures of Federal Awards.
Compliance
We were unable to express and did not express an opinion on the Division of Emergency Management's compliance with requirements applicable to the Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program. Because of internal control deficiencies noted in the Florida Public Assistance System, the lack of sufficient documentation supporting the allowability of payments to subgrantees, and the failure to timely complete final inspections on completed projects, it was not practicable in the circumstances for us to obtain audit evidence sufficient to the expression of an opinion. (Finding Nos. FA 08-080, FA 08-081, and FA 08‑086)
The State of Florida complied, in all material respects, with the compliance requirements applicable to each of its other major Federal awards programs, except as described in the following instances, which resulted in opinion qualifications:
Ř The Department of Education set aside moneys for Immigrant Children and Youth under the English Language Acquisition Grants Program, but did not make such moneys available to subgrantees during the 2007-08 fiscal year. (Finding No. FA 08-026)
Ř The Department of Children and Family Services did not document, in a significant number of instances, the eligibility of clients to receive benefits under the Medicaid Cluster and the performance of required data exchanges. Additionally, data exchange processes were not timely performed. (Finding No. FA 08-058)
Ř The Division of Emergency Management reimbursed subgrantees without adequate documentation under the Homeland Security Cluster and the Hazard Mitigation Grant Program. (Finding Nos. FA 08-068, FA 08-087 and FA 08-088)
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 resulted in questioned costs subject to disallowance by the grantor agency. The compliance requirements involved primarily those pertaining to Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility; and Matching, Level of Effort, and Earmarking. Other instances of noncompliance pertained to various compliance requirements including, but not limited to, Subrecipient Monitoring and Special Tests and Provisions. Instances of noncompliance are described in the Schedule of Findings and Questioned Costs.
Internal Control 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 following significant deficiencies were considered material weaknesses:
Ř The Department of Community Affairs did not have appropriate controls in place regarding user access and system documentation for systems used to process payments and administer the Community Development Block Grant Program (Finding No. FA 08-002) and the Low-Income Home Energy Assistance Program (Finding No. FA 08-046).
Ř The Department of Revenue did not ensure adequate oversight and monitoring of State Disbursement Unit collection and disbursement of child support payments and the reporting thereof. Additionally, the Department of Revenue did not always request the necessary information from the responsible parents to determine whether health insurance was reasonably available or take enforcement action to secure medical support for Child Support Enforcement Program clients. (Finding Nos. FA 08-039 and FA 08-042)
Ř The Division of Emergency Management did not have appropriate general and application controls in place for the Florida Public Assistance System used in administering the Disaster Grants - Public Assistance (Presidentially Declared Disasters) Program. (Finding No. FA 08-080)
Ř The Division of Emergency Management did not maintain adequate documentation to demonstrate whether payments to subgrantees for the Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program were for allowable costs incurred during the authorized project period. (Finding No. FA 08-081)
Ř The Division of Emergency Management had not implemented procedures to provide for the timely completion of final inspections of large projects for the Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program. (Finding No. FA 08-086)
Ř The Division of Emergency Management did not have appropriate controls in place regarding user access and system documentation for the system used to administer the Hazard Mitigation Grant Program. (Finding No. FA 08-089)
Ř The instances described in the previous paragraphs on compliance for the English Language Acquisition Grants Program (Finding No. FA 08-026); Medicaid Cluster (Finding No. FA 08-058); Homeland Security Cluster (Finding No. FA 08-068); and Hazard Mitigation Grant Program (Finding Nos. FA 08-087 and FA 08-088) also involved material weaknesses in internal control.
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:
Ř 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.
Ř 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.
Ř 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.
Ř 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 major 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.
Federal Findings and
Questioned Costs
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
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.