Senate Bill 2002

CODING: Words stricken are deletions; words underlined are additions.



    Florida Senate - 2000                                  SB 2002

    By Senator King





    8-1431-00                                           See HB 731

  1                      A bill to be entitled

  2         An act relating to local government audits;

  3         amending s. 11.45, F.S.; correcting a

  4         cross-reference; raising the threshold at which

  5         a municipality, other than one in a state of

  6         financial emergency, is required to have a

  7         financial audit of its accounts and records

  8         conducted by an independent certified public

  9         accountant in order to continue to receive

10         revenue sharing funds; amending ss. 218.32,

11         218.321, and 311.07, F.S.; correcting

12         cross-references; providing an effective date.

13

14  Be It Enacted by the Legislature of the State of Florida:

15

16         Section 1.  Paragraph (a) of subsection (1) and

17  paragraph (a) of subsection (3) of section 11.45, Florida

18  Statutes, are amended to read:

19         11.45  Definitions; duties; audits; reports.--

20         (1)  As used in this section, the term:

21         (a)  "County agency," for the exclusive purposes of

22  this section, means a board of county commissioners or other

23  legislative and governing body of a county, however styled,

24  including that of a consolidated or metropolitan government, a

25  clerk of the circuit court, a separate or ex officio clerk of

26  the county court, a sheriff, a property appraiser, a tax

27  collector, a supervisor of elections, or any other officer in

28  whom any portion of the fiscal duties of the above are under

29  law separately placed. Each county agency is a local

30  governmental entity for purposes of subparagraph (3)(a)5.4.

31

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1         (3)(a)1.  The Auditor General shall annually make

  2  financial audits of the accounts and records of all state

  3  agencies, as defined in this section, of all district school

  4  boards in counties with populations of fewer than 125,000,

  5  according to the most recent federal decennial statewide

  6  census, and of all district boards of trustees of community

  7  colleges. The Auditor General shall, at least every other

  8  year, make operational audits of the accounts and records of

  9  all state agencies, as defined in this section. The Auditor

10  General shall, at least once every 3 years, make financial

11  audits of the accounts and records of all district school

12  boards in counties with populations of 125,000 or more. For

13  each of the 2 years that the Auditor General does not make the

14  financial audit, each district school board shall contract for

15  an independent certified public accountant to perform a

16  financial audit as defined in paragraph (1)(b). This section

17  does not limit the Auditor General's discretionary authority

18  to conduct performance audits of these governmental entities

19  as authorized in subparagraph 3. A district school board may

20  select an independent certified public accountant to perform a

21  financial audit as defined in paragraph (1)(b) notwithstanding

22  the notification provisions of this section. In addition, a

23  district school board may employ an internal auditor to

24  perform ongoing financial verification of the financial

25  records of a school district, who must report directly to the

26  district school board or its designee. The Auditor General

27  shall, at a minimum, provide to the successor independent

28  certified public accountant of a district school board the

29  prior year's working papers, including documentation of

30  planning, internal control, audit results, and other matters

31  of continuing accounting and auditing significance, such as

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  the working paper analysis of balance sheet accounts and those

  2  relating to contingencies.

  3         2.  Each charter school established under s. 228.056

  4  shall have an annual financial audit of its accounts and

  5  records completed within 12 months after the end of its fiscal

  6  year by an independent certified public accountant retained by

  7  it and paid from its funds. The independent certified public

  8  accountant who is selected to perform an annual financial

  9  audit of the charter school shall provide a copy of the audit

10  report to the district school board, the Department of

11  Education, and the Auditor General. A management letter must

12  be prepared and included as a part of each financial audit

13  report. The Auditor General may, pursuant to his or her own

14  authority or at the direction of the Joint Legislative

15  Auditing Committee, conduct an audit of a charter school.

16         3.  The Auditor General may at any time make financial

17  audits and performance audits of the accounts and records of

18  all governmental entities created pursuant to law.  The audits

19  referred to in this subparagraph must be made whenever

20  determined by the Auditor General, whenever directed by the

21  Legislative Auditing Committee, or whenever otherwise required

22  by law or concurrent resolution.  A district school board,

23  expressway authority, or bridge authority may require that the

24  annual financial audit of its accounts and records be

25  completed within 12 months after the end of its fiscal year.

26  If the Auditor General is unable to meet that requirement, the

27  Auditor General shall notify the school board, the expressway

28  authority, or the bridge authority pursuant to subparagraph 5.

29         4.  The Office of Program Policy Analysis and

30  Government Accountability within the Office of the Auditor

31  General shall maintain a schedule of performance audits of

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  state programs. In conducting a performance audit of a state

  2  program, the Office of Program Policy Analysis and Government

  3  Accountability, when appropriate, shall identify and comment

  4  upon alternatives for accomplishing the goals of the program

  5  being audited. Such alternatives may include funding

  6  techniques and, if appropriate, must describe how other states

  7  or governmental units accomplish similar goals.

  8         5.  If by July 1 in any fiscal year a district school

  9  board or local governmental entity has not been notified that

10  a financial audit for that fiscal year will be performed by

11  the Auditor General pursuant to subparagraph 3., each

12  municipality with either revenues or expenditures of more than

13  $250,000, each municipality that is in a state of financial

14  emergency as a consequence of one or more of the conditions

15  described in s. 218.503(1) with either revenues or

16  expenditures of more than $100,000, each special district with

17  either revenues or expenditures of more than $50,000, and each

18  county agency shall, and each district school board may,

19  require that an annual financial audit of its accounts and

20  records be completed, within 12 months after the end of its

21  respective fiscal year, by an independent certified public

22  accountant retained by it and paid from its public funds.  An

23  independent certified public accountant who is selected to

24  perform an annual financial audit of a school district must

25  report directly to the district school board or its designee.

26  A management letter must be prepared and included as a part of

27  each financial audit report. Each local government finance

28  commission, board, or council, and each municipal power

29  corporation, created as a separate legal or administrative

30  entity by interlocal agreement under s. 163.01(7), shall

31  provide the Auditor General, within 12 months after the end of

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  its fiscal year, with an annual financial audit report of its

  2  accounts and records and a written statement or explanation or

  3  rebuttal concerning the auditor's comments, including

  4  corrective action to be taken. The county audit shall be one

  5  document that includes a separate audit of each county agency.

  6  The county audit must include an audit of the deposits into

  7  and expenditures from the Public Records Modernization Trust

  8  Fund. The Auditor General shall tabulate the results of the

  9  audits of the Public Records Modernization Trust Fund and

10  report a summary of the audits to the Legislature annually.

11         6.  The governing body of a municipality, special

12  district, or charter school must establish an auditor

13  selection committee and competitive auditor selection

14  procedures. The governing board may elect to use its own

15  competitive auditor selection procedures or the procedures

16  outlined in subparagraph 7.

17         7.  The governing body of a noncharter county or

18  district school board that retains a certified public

19  accountant must establish an auditor selection committee and

20  select an independent certified public accountant according to

21  the following procedure:

22         a.  For each noncharter county, the auditor selection

23  committee must consist of the county officers elected pursuant

24  to s. 1(d), Art. VIII of the State Constitution, and one

25  member of the board of county commissioners or its designee.

26         b.  The committee shall publicly announce, in a uniform

27  and consistent manner, each occasion when auditing services

28  are required to be purchased. Public notice must include a

29  general description of the audit and must indicate how

30  interested certified public accountants can apply for

31  consideration.

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1         c.  The committee shall encourage firms engaged in the

  2  lawful practice of public accounting who desire to provide

  3  professional services to submit annually a statement of

  4  qualifications and performance data.

  5         d.  Any certified public accountant desiring to provide

  6  auditing services must first be qualified pursuant to law. The

  7  committee shall make a finding that the firm or individual to

  8  be employed is fully qualified to render the required

  9  services. Among the factors to be considered in making this

10  finding are the capabilities, adequacy of personnel, past

11  record, and experience of the firm or individual.

12         e.  The committee shall adopt procedures for the

13  evaluation of professional services, including, but not

14  limited to, capabilities, adequacy of personnel, past record,

15  experience, results of recent external quality control

16  reviews, and such other factors as may be determined by the

17  committee to be applicable to its particular requirements.

18         f.  The public must not be excluded from the

19  proceedings under this subparagraph.

20         g.  The committee shall evaluate current statements of

21  qualifications and performance data on file with the

22  committee, together with those that may be submitted by other

23  firms regarding the proposed audit, and shall conduct

24  discussions with, and may require public presentations by, no

25  fewer than three firms regarding their qualifications,

26  approach to the audit, and ability to furnish the required

27  services.

28         h.  The committee shall select no fewer than three

29  firms deemed to be the most highly qualified to perform the

30  required services after considering such factors as the

31  ability of professional personnel; past performance;

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  willingness to meet time requirements; location; recent,

  2  current, and projected workloads of the firms; and the volume

  3  of work previously awarded to the firm by the agency, with the

  4  object of effecting an equitable distribution of contracts

  5  among qualified firms, provided such distribution does not

  6  violate the principle of selection of the most highly

  7  qualified firms.  If fewer than three firms desire to perform

  8  the services, the committee shall recommend such firms as it

  9  determines to be qualified.

10         i.  If the governing board receives more than one

11  proposal for the same engagement, the board may rank, in order

12  of preference, the firms to perform the engagement.  The firm

13  ranked first may then negotiate a contract with the board

14  giving, among other things, a basis of its fee for that

15  engagement.  If the board is unable to negotiate a

16  satisfactory contract with that firm, negotiations with that

17  firm shall be formally terminated, and the board shall then

18  undertake negotiations with the second-ranked firm. Failing

19  accord with the second-ranked firm, negotiations shall then be

20  terminated with that firm and undertaken with the third-ranked

21  firm. Negotiations with the other ranked firms shall be

22  undertaken in the same manner.  The board, in negotiating with

23  firms, may reopen formal negotiations with any one of the

24  three top-ranked firms, but it may not negotiate with more

25  than one firm at a time. The board shall also negotiate on the

26  scope and quality of services. In making such determination,

27  the board shall conduct a detailed analysis of the cost of the

28  professional services required in addition to considering

29  their scope and complexity. For contracts over $50,000, the

30  board shall require the firm receiving the award to execute a

31  truth-in-negotiation certificate stating that the rates of

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  compensation and other factual unit costs supporting the

  2  compensation are accurate, complete, and current at the time

  3  of contracting. Such certificate shall also contain a

  4  description and disclosure of any understanding that places a

  5  limit on current or future years' audit contract fees,

  6  including any arrangements under which fixed limits on fees

  7  will not be subject to reconsideration if unexpected

  8  accounting or auditing issues are encountered. Such

  9  certificate shall also contain a description of any services

10  rendered by the certified public accountant or firm of

11  certified public accountants at rates or terms that are not

12  customary.  Any auditing service contract under which such a

13  certificate is required must contain a provision that the

14  original contract price and any additions thereto shall be

15  adjusted to exclude any significant sums by which the board

16  determines the contract price was increased due to inaccurate

17  or incomplete factual unit costs.  All such contract

18  adjustments shall be made within 1 year following the end of

19  the contract.

20         j.  If the board is unable to negotiate a satisfactory

21  contract with any of the selected firms, the committee shall

22  select additional firms, and the board shall continue

23  negotiations in accordance with this subsection until an

24  agreement is reached.

25         8.  At the conclusion of the audit field work, the

26  independent certified public accountant shall discuss with the

27  head of each local governmental entity or the chair's designee

28  or with the chair of the district school board or the chair's

29  designee, or with the chair of the board of the charter school

30  or the chair's designee, as appropriate, all of the auditor's

31  comments that will be included in the audit report.  If the

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  officer is not available to discuss the auditor's comments,

  2  their discussion is presumed when the comments are delivered

  3  in writing to his or her office. The auditor shall notify each

  4  member of the governing body of a local governmental entity

  5  for which deteriorating financial conditions exist which may

  6  cause a condition described in s. 218.503(1) to occur if

  7  actions are not taken to address such conditions.

  8         9.  The officer's written statement of explanation or

  9  rebuttal concerning the auditor's comments, including

10  corrective action to be taken, must be filed with the

11  governing body of the local governmental entity, district

12  school board, or charter school within 30 days after the

13  delivery of the financial audit report.

14         10.  The Auditor General, in consultation with the

15  Board of Accountancy, shall adopt rules for the form and

16  conduct of all financial audits subject to this section and

17  conducted by independent certified public accountants. The

18  Auditor General, in consultation with the Department of

19  Education, shall develop a compliance supplement for the

20  financial audit of a district school board conducted by an

21  independent certified public accountant. The rules for audits

22  of local governmental entities and district school boards must

23  include, but are not limited to, requirements for the

24  reporting of information necessary to carry out the purposes

25  of the Local Government Financial Emergencies Act as stated in

26  s. 218.501.

27         11.  Any local governmental entity or district school

28  board financial audit report required under subparagraph 5. or

29  charter school financial audit report required under

30  subparagraph 2. and the officer's written statement of

31  explanation or rebuttal concerning the auditor's comments,

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  including corrective action to be taken, must be submitted to

  2  the Auditor General within 45 days after delivery of the audit

  3  report to the local governmental entity, district school

  4  board, or charter school, but no later than 12 months after

  5  the end of the fiscal year. If the Auditor General does not

  6  receive the financial audit report within the prescribed

  7  period, he or she must notify the Legislative Auditing

  8  Committee that the governmental entity or charter school has

  9  not complied with this subparagraph. Following notification of

10  failure to submit the required audit report or items required

11  by rule adopted by the Auditor General, a hearing must be

12  scheduled by rule of the committee. After the hearing, the

13  committee shall determine which governmental entities or

14  charter schools will be subjected to further state action.  If

15  it finds that one or more governmental entities or charter

16  schools should be subjected to further state action, the

17  committee shall:

18         a.  In the case of a local governmental entity,

19  district school board, or charter school, request the

20  Department of Revenue and the Department of Banking and

21  Finance to withhold any funds payable to such governmental

22  entity or charter school until the required financial audit is

23  received by the Auditor General.

24         b.  In the case of a special district, notify the

25  Department of Community Affairs that the special district has

26  failed to provide the required audits.  Upon receipt of

27  notification, the Department of Community Affairs shall

28  proceed pursuant to ss. 189.421 and 189.422.

29         12.a.  The Auditor General, in consultation with the

30  Board of Accountancy, shall review all audit reports submitted

31  pursuant to subparagraph 11. The Auditor General shall request

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  any significant items that were omitted in violation of a rule

  2  adopted by the Auditor General. The items must be provided

  3  within 45 days after the date of the request. If the Auditor

  4  General does not receive the requested items, he or she shall

  5  notify the Joint Legislative Auditing Committee.

  6         b.  The Auditor General shall notify the Governor and

  7  the Joint Legislative Auditing Committee of any audit report

  8  reviewed by the Auditor General which contains a statement

  9  that the local governmental entity or district school board is

10  in a state of financial emergency as provided in s. 218.503.

11  If the Auditor General, in reviewing any audit report,

12  identifies additional information which indicates that the

13  local governmental entity or district school board may be in a

14  state of financial emergency as provided in s. 218.503, the

15  Auditor General shall request appropriate clarification from

16  the local governmental entity or district school board.  The

17  requested clarification must be provided within 45 days after

18  the date of the request. If the Auditor General does not

19  receive the requested clarification, he or she shall notify

20  the Joint Legislative Auditing Committee.  If, after obtaining

21  the requested clarification, the Auditor General determines

22  that the local governmental entity or district school board is

23  in a state of financial emergency as provided in s. 218.503,

24  he or she shall notify the Governor and the Joint Legislative

25  Auditing Committee.

26         c.  The Auditor General shall annually compile and

27  transmit to the President of the Senate, the Speaker of the

28  House of Representatives, and the Joint Legislative Auditing

29  Committee a summary of significant findings and financial

30  trends identified in audits of local governmental entities,

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1  district school boards, and charter schools performed by the

  2  independent certified public accountants.

  3         13.  In conducting a performance audit of any agency,

  4  the Auditor General shall use the Agency Strategic Plan of the

  5  agency in evaluating the performance of the agency.

  6         Section 2.  Paragraph (d) of subsection (1) of section

  7  218.32, Florida Statutes, is amended to read:

  8         218.32  Annual financial reports; local governmental

  9  entities.--

10         (1)

11         (d)  Each local governmental entity that is required to

12  provide for an audit report in accordance with s.

13  11.45(3)(a)5.4. must submit the annual financial report with

14  the audit report. A copy of the audit report and annual

15  financial report must be submitted to the department within 45

16  days after the completion of the audit report but no later

17  than 12 months after the end of the fiscal year. All other

18  reporting entities must submit the annual financial report to

19  the department no later than April 30 of each year.

20         Section 3.  Subsection (2) of section 218.321, Florida

21  Statutes, is amended to read:

22         218.321  Annual financial statements; local

23  governmental entities.--

24         (2)  Each local governmental entity that is not

25  required to provide for an audit report in accordance with s.

26  11.45(3)(a)5.4. must complete its financial statements no

27  later than 12 months after the end of the fiscal year.

28         Section 4.  Paragraph (a) of subsection (3) of section

29  311.07, Florida Statutes, is amended to read:

30         311.07  Florida seaport transportation and economic

31  development funding.--

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    Florida Senate - 2000                                  SB 2002
    8-1431-00                                           See HB 731




  1         (3)(a)  Program funds shall be used to fund approved

  2  projects on a 50-50 matching basis with any of the deepwater

  3  ports, as listed in s. 403.021(9)(b), which is governed by a

  4  public body or any other deepwater port which is governed by a

  5  public body and which complies with the water quality

  6  provisions of s. 403.061, the comprehensive master plan

  7  requirements of s. 163.3178(2)(k), the local financial

  8  management and reporting provisions of part III of chapter

  9  218, and the auditing provisions of s. 11.45(3)(a)5.4. Program

10  funds also may be used by the Seaport Transportation and

11  Economic Development Council to develop with the Florida Trade

12  Data Center such trade data information products which will

13  assist Florida's seaports and international trade.

14         Section 5.  This act shall take effect July 1, 2000.

15

16            *****************************************

17                       LEGISLATIVE SUMMARY

18
      Raises the threshold at which a municipality, other than
19    one in a state of financial emergency, is required to
      have a financial audit of its accounts and records
20    conducted by an independent certified public accountant
      in order to continue to receive revenue sharing funds.
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