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PART ONE: BACKGROUND, APPLICABILITY, AND OVERVIEW |
PART TWO: MATRIX OF COMPLIANCE REQUIREMENTS |
PART THREE: COMPLIANCE REQUIREMENTS |
PART FOUR: STATE PROJECT COMPLIANCE REQUIREMENTS |
PART FIVE: INTERNAL CONTROLS |
PART SIX: GUIDANCE FOR AUDITING PROJECTS NOT INCLUDED IN THE COMPLIANCE SUPPLEMENT |
APPENDIX A: LIST OF CHANGES
PART THREE - Compliance
Requirements
Activities Allowed or Unallowed |
Allowable Costs |
Cash Management |
Eligibility |
Equipment and Real Property Management |
Matching |
Period of Availability of State Funds |
Reporting |
Subrecipient Monitoring |
Special Tests and Provisions
The objectives of most compliance requirements for state projects are generic in
nature. For example, many projects have eligibility requirements for individuals or
organizations. While the criteria for determining eligibility vary by project, the
objective of the compliance requirement that only eligible individuals or organizations
participate is consistent across all state projects.
Rather than repeat these compliance requirements, audit objectives, and suggested audit
procedures for each of the projects contained in Part Four - State Project Compliance
Requirements, they are provided once in Part Three. For each project in the Compliance
Supplement, Part Four contains additional information about the compliance requirements
that arise from laws and rules applicable to each project, including requirements
specific to each project that should be tested using the guidance in Part Three.
Auditors shall consider the compliance requirements and related audit objectives in
Parts Three and Four in every audit of nonstate entities required by the Florida Single
Audit Act. In making a determination not to test a compliance requirement, the auditor
must conclude that the requirement either does not apply to the particular nonstate
entity, or that noncompliance with the requirement could not have a material effect
on a major project. The descriptions of compliance requirements in Parts Three and
Four are generally summaries of the actual compliance requirements. The auditor should
refer to the referenced laws and rules for complete compliance requirements.
The suggested audit procedures are provided to assist auditors in planning and
performing tests of nonstate entity compliance with the requirements of state
projects. Auditor judgment will be necessary to determine whether the suggested audit
procedures are sufficient to achieve the stated audit objective and whether additional
or alternative audit procedures are needed.
Because of the diversity of systems in place among nonstate entities, Part Three does
not include suggested audit procedures to test internal control. The auditor must
determine appropriate procedures to test internal control on a case-by-case basis
considering factors such as the nonstate entity's internal control, the compliance
requirements, the audit objectives for compliance, the auditor's assessment of control
risk, and the audit requirement to test internal controls as prescribed in Section
215.97(8), Florida Statutes. However, Part Five - Internal Controls, provides the
objectives of internal controls and certain characteristics of internal control
that, when present and operating effectively, may ensure compliance with the
requirements enumerated in Parts Three and Four.
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A. Activities Allowed or Unallowed
Compliance Requirements
This compliance requirement specifies the activities that can or cannot be funded under
a specific project. The specific requirements for activities allowed or disallowed
are unique to each state project and are found in the laws, rules, and the provisions
of contracts or grant agreements. For projects listed in the Compliance
Supplement, these specific requirements are in Part Four.
Audit Objectives
Determine whether state financial assistance was expended only for allowable activities.
Suggested Audit Procedures
- Identify the types of activities that are either specifically allowed or prohibited
by the laws, rules, and the provisions of contracts or grant agreements pertaining to
the project.
- When allowability is determined based upon summary level data, perform procedures
to verify that:
- Activities were allowable.
- Individual transactions were properly classified and accumulated into
the activity total.
- When allowability is determined based upon individual transactions, select a sample
of transactions and perform procedures to verify that the transaction was for an
allowable activity.
- The auditor should be alert for transfers of funds from project accounts that may
have been used to fund unallowable activities.
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B. Allowable Costs
Compliance Requirements
Entities are prohibited from using grant funds for lobbying the
legislature. (Section 216.347, Florida Statutes). Also, restrictions of expenditures
are summarized in the Voucher Processing Handbook of the Department of Banking and
Finance. Other specific requirements for allowable costs are unique to each state
project and are found in the laws, rules, and the provisions of contracts or grant
agreements pertaining to the project. For projects listed in the Compliance
Supplement, these specific requirements are in Part Four.
Audit Objectives
Determine whether expenditures of state financial assistance were for allowable costs.
Suggested Audit Procedures
- Identify the types of costs that are either specifically allowed or prohibited by
the laws, rules, and provisions of contracts or grant agreements pertaining to the
project.
- Select a sample of transactions and perform procedures to verify that the
transactions were for an allowable cost and not for lobbying the legislature or other
prohibited uses.
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C. Cash Management
Compliance Requirements
State agencies which are expressly authorized by law to make advances for project
startup or contracted services in total or periodically, shall limit such advances to
other governmental entities and nonprofit entities. The amount to be advanced may not
exceed the expected cash needs of the recipient within the initial 3 months. Thereafter
disbursements are to be made only on a reimbursement basis.
The Comptroller, after consultation with the appropriations committee, may advance funds
beyond a 3-month requirement if it is determined to be consistent with the intent of the
approved operating budget. Any agreement that provides for
advances may contain a clause that permits the recipient to temporarily invest the
proceeds, provided that any interest income either be returned to the agency or applied
against the agency's obligation to the pay the contract amount.
(Section 216.181, Florida Statutes) Specific cash management requirements
unique to a state project may be found in the laws, rules, and the provisions of
contracts or grant agreements pertaining to the project. For projects listed in the
Compliance Supplement, these specific requirements are in Part Four.
Audit Objectives
- Determine that cash management procedures are in accordance with Section
216.181, Florida Statutes, and other laws, rules, and the provisions of contracts or
grant agreements pertaining to the state project.
- Determine that interest income, when allowable, is correctly recorded and returned
to the state agency or applied against the contract or grant agreement.
Suggested Audit Procedures
- Review reimbursement requests and trace to supporting documentation. Ensure that
costs for which reimbursement was requested were paid prior to the date of the
reimbursement request.
- Determine whether any interest income was owed to the state agency and either
remitted to the agency or applied against amounts owed by the state agency.
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D. Eligibility
Compliance Requirements
This compliance requirement specifies the criteria for determining the beneficiaries
(individuals or groups of individuals), or the subrecipients that can participate in the
project and the amounts for which they qualify. The specific requirements for
eligibility are unique to each state project and are found in the laws, rules, and the
provisions of contracts or grant agreements pertaining to the project. For projects
listed in the Compliance Supplement, these specific requirements are in Part Four.
Audit Objectives
- Determine whether required eligibility determinations were made and that only
eligible beneficiaries (individuals or groups of individuals), participated in the
project.
- Determine that subawards were made only to eligible subrecipients.
- Determine that amounts provided to, or on behalf of, eligible beneficiaries and
subrecipients were calculated in accordance with project requirements.
Suggested Audit Procedures
- Eligibility for Beneficiaries:
- For state projects with large numbers of people receiving benefits, the
nonstate entity may use a computer system for processing individual eligibility
determinations and delivery of benefits. In such cases the auditor should
perform audit procedures relative to any computer systems used for determining
eligibility as may be necessary to support the opinion on compliance.
- Perform audit procedures to ascertain if the nonstate entity's
records/database includes all individuals or groups of individuals receiving
benefits during the audit period.
- Perform tests to determine whether: the nonstate entity performed the required
eligibility determination and the individual or group of individuals was determined to
be eligible; benefits were calculated correctly and in compliance with requirements of
the project; and benefits were discontinued when the period of eligibility ended.
- Eligibility for Subrecipients
- If the determination of eligibility is based upon an approved application or
plan, obtain a copy of this document and identify the applicable eligibility
requirements.
- Select a sample of the awards to subrecipients and perform procedures to
verify that the subrecipients were eligible and amounts awarded were within
funding limits.
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E. Equipment and Real Property Management
Compliance Requirements
This requirement specifies the use, management, and disposition of equipment and real
property acquired with state financial assistance.
If compliance with Section 216.348, Florida Statutes, is required by the
appropriations bill, the nonprofit entity must execute a written agreement with the
state agency pursuant to the following:
The nonprofit entity that acquires real property with the grant, or that owns
real property upon which an improvement is being constructed, renovated, altered,
modified, or maintained with the grant, must execute, deliver and record in the
county in which the subject property is located an agreement that prohibits the
nonprofit entity from selling, transferring, mortgaging, or assigning its interest
in the real property during the term of the agreement unless approved by the state
agency.
For the nonprofit entity that does not acquire real property or does not own the
real property being improved, the agreement shall prohibit the nonprofit entity
from selling, transferring, mortgaging, or assigning its interest in the leasehold,
improvements, renovations, or personality, unless approved by the agency.
Additionally, the nonprofit entity shall execute and deliver a security instrument,
financing statement, or other appropriate document securing the interest of the
state agency.
All agreements must require the nonprofit entity to continue the operation,
maintenance, repair and administration of the property in accordance with the purposes
for which the funds were originally appropriated and for the period of time expressly
specified by the bill appropriating the grant or, failing to do so, the nonprofit
entity must return to the state agency grant funds as specified by law.
All agreements must require that the nonprofit entity adopt an accounting system
in compliance with generally accepted accounting principles, which shall provide
for a complete record of the use of the grant money.
All agreements must require the nonprofit entity to purchase and maintain insurance
on behalf of the directors, officers, and employees of the nonprofit entity against any
personal liability or accountability by reason of actions taken while acting within the
scope of their authority.
All agreements must require the nonprofit entity to return any portion of the grant
money received that is not necessary to the purchase of the land, or to the cost of the
improvements, renovations, and personality, for which the grant was awarded.
The state agency may require that the nonprofit entity obtain a blanket fidelity bond,
in the amount of the grant, which will reimburse the agency in the event that anyone handling
the grant money either misappropriates or absconds with the grant moneys.
(Section 216.348, Florida Statutes)
Other requirements for equipment and real property management are unique to each
state project and are found in the laws, rules, and the provisions of contracts or
grant agreements pertaining to the project. For projects listed in the Compliance
Supplement, these specific requirements are in Part Four.
Audit Objectives
- Determine whether the nonstate entity maintains proper records for equipment and
adequately safeguards and maintains equipment.
- Determine whether disposition of any equipment or real property acquired under state
awards is in accordance with laws, rules, and the provisions of contracts and grant
agreements.
- Determine whether the nonprofit entity receiving grant funds was subject to and
complied with the requirements of Section 216.348, Florida Statutes.
Suggested Audit Procedures
- Determine the population of equipment and real property acquisitions made with the
state financial assistance.
- Review any physical inventory records and determine whether any differences between
physical inventory and equipment records were resolved. Physically inspect a sample of
equipment identified as acquired with state financial assistance.
- Select a sample of equipment transactions and test for compliance with
laws, rules, and the provisions of contracts or grant agreements.
- Determine whether the nonstate entity disposed of equipment or real property acquired
with state financial assistance in accordance with laws, rule, and provisions of
contracts or grant agreements pertaining to the project.
- For a nonprofit entity subject to Section 216.348, Florida Statutes,
determine the following:
- That the nonprofit entity that acquired real property with the grant, or
that owned real property upon which an improvement was being constructed, renovated,
altered, modified, or maintained with the grant, executed, delivered and recorded in
the county in which the subject property was located an agreement that prohibited
the nonprofit entity from selling, transferring, mortgaging, or assigning its interest
in the real property during the term of the agreement unless approved by the agency.
- That the nonprofit entity that did not acquire real property or did not own the real
property being improved, executed and delivered a security instrument, financing statement,
or other appropriate document securing the interest of the state agency. (Refer to Chapter
679, Florida Statutes, Uniform Commercial Code regarding the filing and perfecting of a
security instrument.)
- That the nonprofit entity continued the operation, maintenance, repair and administration
of the property in accordance with the purposes for which the funds were originally appropriated
and for the period of time expressly specified by the bill appropriating the grant or, if failing
to do so, returned to the state agency grant funds as specified by law.
- That the nonprofit entity adopted an accounting system in compliance with generally
accepted accounting principles, which provided for a complete record of the use of the grant
money.
- That the nonprofit entity purchased and maintained insurance on behalf of the directors,
officers, and employees of the nonprofit entity against any personal liability or accountability
by reason of actions taken while acting within the scope of their authority.
- That the nonprofit entity returned any portion of the grant money received that was not
necessary to the purchase of the land, or to the cost of the improvements, renovations, and
personality, for which the grant was awarded.
- That, if required by the state agency, the nonprofit entity obtained a blanket fidelity
bond, in the amount of the grant.
- That the nonprofit entity complied with any other requirements specified by the state
agency in the agreement.
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F. Matching
Compliance Requirements
This requirement specifies the acceptable contributions of a stated amount or percentage
to match state awards. Matching may be in the form of allowable costs incurred or
in-kind contributions. The specific requirements for matching are unique to each state
project and are found in the laws, rules, and the provisions of contracts or grant
agreements pertaining to the project. For projects listed in the Compliance
Supplement, these specific requirements are in Part Four.
Audit Objectives
Determine whether the minimum amount or percentage of contributions or matching funds was
provided.
Suggested Audit Procedures
- Perform tests to verify that the required matching contributions were met.
- Ascertain the sources of matching contributions and perform tests to verify that they
were from an allowable source.
- Test records to corroborate that the values placed on in-kind contributions are in
accordance with laws, rules, and provisions of the contract or grant agreement pertaining
to the project.
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G. Period of Availability of State Funds
Compliance Requirements
This requirement specifies the time period during which the nonstate entity may use the
state financial assistance. The specific requirements for the availability of funds
are unique to each state project and are found in the laws, rules, and the provisions
of contracts or grant agreements pertaining to the project. For projects listed in the
Compliance Supplement, these specific requirements are in Part Four.
Audit Objectives
Determine whether state funds were obligated within the period of availability and
obligations were liquidated within the required time period.
Suggested Audit Procedures
- Review laws, rules, and contracts or grant documents pertaining to the
project, determine any award-specific requirements related to the period of
availability, and document the availability period.
- Test a sample of transactions that were charged to the state project after the end of
the period of availability and verify that the underlying obligations occurred within the
period of availability.
- Test a sample of transactions that were charged to the state project during the period
of availability and verify that the underlying obligations occurred within the period of
availability.
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H. Reporting
Compliance Requirements
This requirement specifies the type(s) of financial, performance, and special reporting
to be prepared by the nonstate entity as a result of receiving state financial
assistance. The specific requirements for reporting are unique to each state project
and are found in the laws, rules, and the provisions of contracts or grant agreements
pertaining to the project. For projects listed in the Compliance Supplement, these
specific requirements are in Part Four.
Audit Objectives
Determine whether required reports include all activity of the reporting period, are
supported by applicable accounting or performance records, and are fairly presented in
accordance with project requirements.
Suggested Audit Procedures
- Review award documents and rules pertaining to the project and determine any
award-specific reporting requirements.
- Perform analytical procedures on reported amounts, ascertaining the reason for any
unexpected differences.
- Select a sample of reports and test specified line items for accuracy and
completeness.
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I. Subrecipient Monitoring
Compliance Requirements
Nonstate entities that provide state financial assistance to a subrecipient
shall: provide to a subrecipient information needed by the subrecipient to comply with
the requirements of the Florida Single Audit Act; review subrecipient audit
reports, including management letters, to the extent necessary to determine whether
timely and appropriate corrective action has been taken; perform such other procedures
as specified in the terms and conditions of the written agreement with the state agency
including any required monitoring of the subrecipient's use of state financial
assistance through site visits, limited scope audits, or other specified procedures; and
require that the subrecipient provide access to its records to the nonstate entity's
independent auditor, the state awarding agency, the Comptroller, and the Auditor
General. (Section 215.97, Florida Statutes) For projects listed in the Compliance
Supplement, other requirements are provided in Part Four.
Audit Objectives
- Determine whether award information and compliance requirements were identified in
award documents to subrecipients.
- Determine whether the nonstate entity identified all applicable subrecipient audits
and monitored the receipt thereof.
- Determine whether subrecipient audits, including management letters, were reviewed.
- Determine whether specific requirements regarding subrecipients addressed in the
recipient's agreement with the state agency, including any required monitoring of the
subrecipient's use of state financial assistance through site visits, limited scope
audits, or other specified procedures, were met.
- Determine whether subrecipient agreements required that access to records be
provided as required by law.
Suggested Audit Procedures
- Review award documents to ascertain if the nonstate entity made subrecipients aware
of information and requirements, including the required access to records.
- Verify that the nonstate entity had a system in place to monitor the receipt of audit
reports from subrecipients required to have a state single audit, including follow-up
procedures when required audits were not made or were made but not in accordance with
Section 215.97, Florida Statutes.
- Verify that the nonstate entity reviewed subrecipient audits, including management
letters, to determine whether timely and appropriate corrective action was taken with
respect to audit findings and recommendations pertaining to the state financial assistance
provided.
- Determine whether other procedures specified in the terms and conditions of the
written agreement with the state agency, including any required monitoring through
on-site visits, limited scope audits, or other procedures, have been performed.
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J. Special Tests and Provisions
Compliance Requirements
The specific requirements for Special Tests and Provisions are unique to each state
project and are found in the laws, regulations, and the provisions of contracts or grant
agreements pertaining to the project. For projects listed in the Supplement, the
compliance requirements, audit objectives, and suggested audit procedures for Special
Tests and Provisions are in Part Four, State Projects Compliance Requirements. For
projects not listed in this supplement, the auditor shall review referenced laws, rules,
and the project's contracts or grant agreements to identify the compliance requirements
and develop the audit objectives and audit procedures for Special Test and Provisions
which could have a direct and material effect on a major project. The auditor should
also inquire of the nonstate entity to help identify and understand any Special Tests
and Provisions.
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