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Rules of the Executive Office of the Governor

27D-1.001 Applicability and Definitions | 27D-1.002 Types of State Financial Assistance | 27D-1.003 Recipient/Subrecipient and Vendor Relationships | 27D-1.006 Criteria for Major State Projects | 27D-1.007 Criteria for Selecting State Projects for Audit Based on Inherent Risk

27D-1 Florida Single Audit Act

27D-1.001 Applicability and Definitions

  1. These rules are applicable to state agencies awarding financial assistance, recipients and subrecipients of state financial assistance, and independent auditors of state financial assistance.

  2. For purposes of this Chapter, the following terms shall have the meaning indicated:

    1. "Auditee" means a nonstate organization expending state awards in excess of the audit threshold as defined by Section 215.97(2)(a), Florida Statutes.
    2. "State agency" is defined by Section 216.011, Florida Statutes.

Specific 215.97(3) FS.
Law Implemented 215.97 FS.
History-New 7-16-00

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27D-1.002 Types of State Financial Assistance.

  1. State financial assistance is financial assistance from state resources to nonstate 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 shall be categorized by the following classes or types of financial assistance:

    1. Cooperative Agreements - Financial assistance transferred pursuant to written agreements between state agencies and recipients to carry out a public purpose. Cooperative agreements generally assume a substantial involvement between state agencies and recipients when carrying out the activities contemplated in the agreements.
    2. Direct Appropriations - Financial assistance appropriated to state agencies to be provided directly to specified nonstate entities per legislative proviso to encourage or subsidize particular activities.
    3. Food Commodities - Financial assistance which provides for the sale or donation of food.
    4. Grants - Financial assistance transferred pursuant to written agreements between state agencies and recipients to carry out a public purpose. Generally, a substantial involvement is not expected between state agencies and recipients when carrying out the activities contemplated in the agreements.
    5. Insurance - Financial assistance provided to assure reimbursement for losses sustained under specified conditions.
    6. Investments - Financial assistance provided for investment in the development of particular activities or enterprises.
    7. Loans - Financial assistance provided through the lending of state monies for a specific period of time, with a reasonable expectation of repayment. Such loans may or may not require the payment of interest.
    8. Loan Guarantees - Financial assistance provided in which the state agency makes an arrangement to indemnify a lender against part or all of any defaults by those responsible for repayment of loans.
    9. Property - Financial assistance provided for the sale, exchange or donation of state real property, personal property, commodities, and other goods including land, buildings, and equipment.
    10. Tax Credits - Financial assistance provided in the form of credits of state taxes for a public purpose authorized by state law.
    11. Tax Refunds - Financial assistance provided in the form of refunds of state taxes for a public purpose authorized by state law.

  2. The following provisions are to be used in determining state financial assistance expended.

    1. 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 organization to comply with laws, rules and the provisions of contracts or grant agreements such as: expenditure/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.
    2. 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 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.
    3. Property and Food Commodities. Non-cash assistance, such as property and food commodities are to be valued at either the fair market value at the time of receipt or the assessed value provided by the state agency.

Specific 215.97(3) FS.
Law Implemented 215.97 FS.
History-New 7-16-00

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27D-1.003 Recipient/Subrecipient and Vendor Relationships

  1. State awards expended by a recipient/subrecipient are subject to audit under Section 215.97, Florida Statutes, Florida Single Audit Act. Procurement contracts used to buy goods or services from vendors are outside the scope of the Act. The guidance provided in (2) through (4) of this section shall be considered in determining whether the nonstate organization has a recipient or vendor relationship with the state agency. This guidance may also be used by recipients providing subawards of state financial assistance to subrecipients.

  2. Characteristics indicative of a recipient relationship are when the nonstate organization:

    1. Is established or created by State law to carry out a state project.
    2. Determines final eligibility.
    3. Receives funds for a project established by state statute and for which the state agency is authorized to provide funding.
    4. Provides matching funds.
    5. Makes programmatic decisions on behalf of the state.
    6. Uses the funds to carry out its own program or operations.
    7. Receives federal funds under a similar program for which it is designated a recipient by the state agency.
    8. Is organized primarily for a public purpose.

  3. Characteristics indicative of a vendor relationship are when the nonstate organization:

    1. Provides services within normal business operations.
    2. Operates in a competitive environment.
    3. Provides similar services to many different purchasers.
    4. Receives payment on a per unit or per deliverable basis.
    5. Is awarded the contract based on free and open competition.
    6. Receives federal funds under a similar program for which it is designated a vendor by the state agency.

  4. There may be circumstances or exceptions to the listed characteristics as set forth above in (2) and (3). It is not expected that all of the characteristics will be present in all cases.

Specific 215.97(3) FS.
Law Implemented 215.97 FS.
History-New 7-16-00

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27D-1.006 Criteria for Major State Projects.

  1. The independent auditor shall use a risk-based approach to determine which state projects are major state projects. This risk-based approach shall include consideration of the amount of state project expenditures and the inherent risk of the state project. The process enumerated in paragraphs (2) through (6) shall be followed.

  2. The independent auditor shall identify the larger state projects as Type A Projects according to the following criteria:

    1. For auditees with expenditures of state awards between $300,000 and $1,000,000, Type A projects are defined as the larger of $100,000 or thirty percent (30%) of total state awards expended.
    2. For auditees with expenditures of state awards exceeding $1,000,000, Type A projects are defined as the larger of $300,000 or three percent (3%) of total state awards expended.

  3. State projects not identified as Type A Projects shall be considered Type B Projects.

  4. The independent auditor 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, should have had no reportable audit findings. The auditor shall consider the criteria enumerated in Rule 27D-1.007, 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 shall identify Type B Projects which are high-risk. The auditor shall consider the criteria enumerated in Rule 27D-1.007, 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:

    1. For auditees with expenditures of state awards of $300,000 to $1,000,000, risk assessments shall be required for Type B Projects that exceed the larger of $50,000 or ten percent (10%) of total state awards expended.
    2. For auditees with expenditures of state awards that exceed $1,000,000, risk assessments shall be required for Type B Projects that exceed the larger of $100,000 or 1 percent (1%) of total state awards expended.

  6. At a minimum, the independent auditor shall audit all of the following as major projects:

    1. All Type A Projects, except the auditor may exclude any low-risk Type A Projects.
    2. At least one half of the Type B Projects identified as high-risk, except the auditor is not required to audit more high-risk Type B Projects than the number of low-risk Type A Projects; or one high-risk Type B Project for each low-risk Type A Project identified. The auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B Projects to be audited as a major project over a period of time.
    3. 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 Rule 27D-1.007, F.A.C.

Specific 215.97(3) FS.
Law Implemented 215.97 FS.
History-New 7-16-00

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27D-1.007 Criteria for Selecting State Projects for Audit Based on Inherent Risk

  1. The independent auditor's selection of state projects for audit 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 shall use professional judgment and consider criteria, such as described in paragraphs ( 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 shall consider current and prior audit experience.

    1. 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/grant provisions, and the competence and experience of personnel who administer the state financial assistance project.
    2. Prior audit findings would indicate higher risk, particularly when situations identified in the audit finding could have a significant impact on state financial assistance or have not been corrected.
    3. State projects not recently audited as major state projects may be of higher risk than state projects recently audited as major state projects without audit findings.

  3. The independent auditor 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 shall consider the inherent risk of the project, which includes the following:

    1. The nature of the project. This includes, for example, a project's complexity, the presence of third parties, and the type of costs involved.
    2. The phase of the project in its life cycle at the state agency. A newer project may not be as time-tested and, therefore, may present higher risk. The state agency's monitoring procedures may not yet be implemented or effectively in place. Significant changes in the program, laws, rules, or contracts or grant agreements may also increase risk.
    3. The phase of the project in its life cycle at the auditee. If a project is new to the auditee, there may be higher risk simply because a learning curve may be present. During the first and last years that an auditee participates in a state project, the risk may be higher due to start-up or closeout of program activities and staff.
    4. Type B Projects with larger expenditures. Projects with larger amount of expenditures would be of higher risk than projects with substantially smaller expenditures.

  5. The independent auditor 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 shall consider this guidance in determining major projects in audits not yet substantially completed.

Specific 215.97(3) FS.
Law Implemented 215.97 FS.
History-New 7-16-00

27D-1.001 Applicability and Definitions | 27D-1.002 Types of State Financial Assistance | 27D-1.003 Recipient/Subrecipient and Vendor Relationships | 27D-1.006 Criteria for Major State Projects | 27D-1.007 Criteria for Selecting State Projects for Audit Based on Inherent Risk

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Florida Single Audit Act | Catalog of State Financial Assistance | State Projects Compliance Supplement | Rules of the Executive Office of the Governor | Section 215.97, Florida Statutes, Florida Single Audit Act | Links to Related Sites