auditor general update florida department of education charter school conference november 20, 2013
TRANSCRIPT
Auditor General Update
Florida Department of Education Charter School Conference
November 20, 2013
Topics for Discussion
Auditor General Responsibilities Laws and Rules Update Review of Charter School and District
School Board Audit Reports Significant Financial Trends and
Findings Identified in Audit Reports Resources
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Provide Technical Advice and Education Rules of the Auditor General Guidelines Audit Report Reviews Significant Financial Trends and Findings Joint Legislative Audit Committee
Notifications
Auditor General Responsibilities
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Who do we assist? Local government officials CPAs State Agencies Nonprofit/For-profit organizations Charter Schools and Charter Technical Career
Centers District School Boards Legislators and staff Reporters Concerned Citizens
Technical Assistance/Education
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How do we assist? Respond to Technical Inquiries Presentations at Conferences Auditor General Web site
Audit reports filed pursuant to Section 218.39, F.S. Rules of the Auditor General Guidelines Sample Management Letters
Technical Assistance/Education
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Rules of the Auditor General
Chapter 10.800 – Audits of District School Boards
Chapter 10.850 - Audits of Charter Schools and Similar Entities, Florida Virtual School, and Virtual Instruction Program Providers
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Charter School and District School Board Audit Report Reviews
Financial Emergency
Auditor Selection
Guidelines
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Joint Legislative Auditing Committee Notifications
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Notification of Failure to File Audit Reports
Notification of Failure to Provide Items Omitted from
Audit Reports
Notification of Entities Meeting One or More
Conditions Specified in Section 218.503(1), F.S.
Notification of Entitles That Have Failed to Take Full
Corrective Action in Response to a Recommendation
That Was Included in the Two Preceding Audit Reports
Joint Legislative Auditing Committee Notifications
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Notification of Failure to File Audit Reports (Section
11.45(7)(b), F.S.)
For the 2011-12 fiscal year, we notified the JLAC of 15
charter schools that did not file the required audit report.
13 of the 15 charter schools closed during or subsequent
to the 2011-12 fiscal year.
Joint Legislative Auditing Committee Notifications
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15 charter schools did not file required audit report.
2011 – 8 charter schools
2010 – 10 charter schools
2009 – 16 charter schools
2008 – 8 charter schools
Joint Legislative Auditing Committee Notifications
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Notification of Failure to Provide Items Omitted from
Audit Reports (Section 11.45(7)(b), F.S.)
We sent letters to 22 charter schools requesting items
missing from the audit reports.
For the 2011-12 fiscal year, we notified the JLAC of 4
charter schools that did not provide the omitted items.
Joint Legislative Auditing Committee Notifications
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Notification of Entities Meeting One or More Conditions
Specified in Section 218.503(1), F.S. (Section 11.45(7)(e),
F.S.)
For the 2011-12 fiscal year, we notified the JLAC of one
audit report for which the auditor indicated that the
charter school met one or more of the financial
conditions specified in Section 218.503(1), F.S.
Joint Legislative Auditing Committee Notifications
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Notification of Entities That Have Failed to Take Full
Corrective Action in Response to a Recommendation That
Was Included in the Two Preceding Audit Reports (Section
218.39(8), F.S.)
For the 2011-12 fiscal year, we notified the JLAC of 31
charter schools (38 findings) that failed to take full
corrective action in response to a recommendation that
was included in the two preceding audit reports.
AG Chapter 10.800 and 10.850 Rule Changes
Audit findings contained in reports, schedules, and management letters must include reference numbers.
New language: “If an audit finding in the preceding financial audit report is uncorrected, the auditor must determine whether the finding was also included in the second preceding fiscal year financial audit report. Uncorrected findings in the current fiscal year audit report must cite the finding reference numbers used in the preceding and, as applicable, the second preceding fiscal year financial audit reports.”
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2013 LegislationSection 1002.33, F.S.
Upon initial notification of nonrenewal, closure, or termination of its charter, a charter school may not expend more than $10,000 per expenditure without prior written approval from the sponsor unless such expenditure was included within the annual budget submitted to the sponsor pursuant to the charter contract, is for reasonable attorney fees and costs during the pendency of any appeal, or is for reasonable fees and costs to conduct an independent audit. Section 1002.33(9)(g)6.(o)1., F.S.
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2013 LegislationSection 1002.33, F.S.
An independent audit shall be completed within 30 days after notice of nonrenewal, closure, or termination to account for all public funds and assets. Section 1002.33(9)(g)6.(o)2., F.S.
A provision in a charter contract that contains an acceleration clause requiring the expenditure of funds based upon closure or upon notification of nonrenewal or termination is void and unenforceable. Section 1002.33(9)(g)6.(o)3., F.S.
A charter school may not enter into a contract with an employee that exceeds the term of the school’s charter contract with its sponsor. Section 1002.33(9)(g)6.(o)4., F.S.
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2013 LegislationSection 1002.33, F.S.
Each charter school shall maintain a Web site that enables the public to obtain information regarding the school; the school’s academic performance; the names of the governing board members; the programs at the school; any management companies, service providers, or education management corporations associated with the school; the school’s annual budget and its annual independent fiscal audit; the school’s grade pursuant to Section 1008.34, F.S.; and, on a quarterly basis, the minutes of governing board meetings. Section 1002.33(9)(g)6.(p), F.S.
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2013 LegislationSections 473.3065 and 473.3125, F.S.
Amends Section 473.3065, F.S., increasing annual frequency of scholarships provided by the Board of Accountancy (BOA) to twice per year and increases annual maximum from $100,000 to $200,000.
Creates Section 473.3125, F.S., requiring CPA firms to be enrolled in a peer review program as a condition of licensure as of January 1, 2015. BOA to adopt rules for the minimum standards for peer review programs.
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Review of Charter School/DSB financial audit reports in
consultation with the Board of Accountancy – issue report on
review results annually
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Reminders
Delivery date must be included on the submittal checklist.
Electronic copy of the audit report must be provided.
Management must respond to all findings included in the audit report package, including those in the report on compliance and internal control, management letter, and including prior year audit findings.
All findings must have reference numbers.
Auditors must identify those findings that are being reported for the 3rd consecutive audit.
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2011-12 Fiscal Year
District School Board
and Charter School
Audit Report ReviewsReport No. 2013-187
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Section 11.45, F.S., requires that we perform desk reviews of audit reports received pursuant to Section 218.39, F.S.
We review:
All reports for general compliance
Samples of reports for more comprehensive compliance, Federal Single Audit requirements, Pension and OPEB requirements
2011-12 FY Report Review Results
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Section 11.45, F.S., requires us to request any significant items omitted from audit reports submitted.
Charter schools and district school boards have 45 days to respond
Notification to Legislative Auditing Committee for entities that fail to provide missing items requested
2011-12 FY Report Review Results
2011-12 FY Report Review Results
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One of the common requests was for managements response/rebuttal to any audit findings (includes management letter comments).
7 out of 22 letters sent were for this item that was missing from the original audit report submission.
2011-12 FY Report Review Results
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Audit Report Submittal
27 charter schools submitted the audit report after the 45-day deadline (but before the 9-month deadline)
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Audit Report Submittal
4 charter school and 8 district school board audit reports received after the 9-month deadline:
Improvement over the last 5 years:
2011 – 13 charter schools; 4 DSBs
2010 – 10 charter schools; 5 DSBs
2009 – 21 charter schools
2008 – 31 charter schools; 8 DSBs
2011-12 FY Report Review Results
2011-12 FY Report Review Results
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Licensing of Auditors
Section 218.39, F.S., requires charter schools and rotational district school boards to provide for an annual financial audit to be conducted by an independent CPA.
Section 473.322, F.S., requires that auditors practicing public accountancy in Florida be licensed by the Board of Accountancy.
2 audits were performed by firms that did not have the appropriate licensure as of the date of the auditor’s report.
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2011-12 FY Report Review Results
The opinion on the audited financial statements did not identify either all or some of the individual opinion units upon which the auditor was opining.
(AAG-SLV. Paragraphs 14.12 and .16)
133 (27 percent) of 499 applicable charter school audit reports
Auditor’s Report on Financial Statements
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2011-12 FY Report Review Results
Did not address the auditor’s responsibility for supplementary information presented.
(AAG-SLV, Paragraphs 14.50-.51, .61-.66, 4.93)
29 (44 percent) of 66 applicable charter school audit reports
Auditor’s Report on Financial Statements
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2011-12 FY Report Review Results Auditor’s Report on Internal
Control Over Financial Reporting and Compliance
Statement that other additional matters, not considered to be material weakness or significant deficiencies, or immaterial instances of noncompliance, were communicated to management in a separate management letter not included.
(AAG-SLA 4.28o, 4.37; GAS 5.16, .20)
48 (48 percent) of 99 applicable charter school audit reports
3 (23 percent) of 13 applicable district school board audit reports
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2011-12 FY Report Review Results
Notes to Financial Statements
Did not disclose a general description of the principal purposes of interfund transfers.
(GASB Codification, Section 2300.121b)
65 (42 percent) of the 154 applicable charter school audit reports
2011-12 FY Report Review Results
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Comprehensive Reviews
The ending fund balance or net assets shown in the preceding year’s financial statements differed by a material amount from the beginning fund balances or net assets shown in the current year’s financial statements and the material difference was not disclosed. 4 (9 percent) of 46 applicable charter school audit reports
3 (15 percent) of 20 applicable district school board audit reports.
2011-12 FY Report Review Results
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Comprehensive Reviews
Financial statements not mathematically correct (not rounding errors).
4 (8 percent) of 50 applicable charter school
6 (30 percent) of 20 applicable district school boards
2011-12 FY Report Review Results
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Comprehensive Reviews
The notes to the financial statements did not disclose significant violations of law for material overexpenditures at the legal level of control identified in the budgetary comparison schedules or the actions taken to address these significant violations of law.
(GASB Codification, Sections 2300.106h and 1200.112)
All 15 applicable charter school audit reports.
2011-12 FY Report Review Results
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Comprehensive Reviews
The notes to the financial statements did not disclose the policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for which both restricted or unrestricted net assets are available.
(GASB Codification, Section 2300.106a(12))
6 (33 percent) of 18 applicable charter school audit reports
2011-12 FY Report Review Results
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Pension Plans
Notes to the financial statements for defined contribution plans did not disclose the name of the plan, identification of the entity that administers the plan, and identification of the plan as a defined contribution plan.
(GASB Codification, Section P20.124a)
11 (48 percent) of 23 applicable charter school audit reports
1 (5 percent) of 20 applicable district school board audit reports
2011-12 FY Report Review Results
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OPEB Disclosures
The authority under which the obligation of plan members, employers, and any other parties to contribute is established and may be amended were not disclosed.
(GASB Codification, Section Po50.126c(1))
6 (30 percent) of the 20 applicable district school board audit reports.
2011-12 FY Report Review Results
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OPEB Disclosures
Factors that significantly affect the identification of trends in the amounts reported (e.g. changes in benefit provisions, the size or composition of the population covered by the plan, the actuarial methods and assumptions used, etc.) were not disclosed.
(GASB Codification, Section P50.124b)
14 (70 percent) of the 20 applicable district school board audit reports.
2011-12 FY Report Review Results
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Federal Awards
Schedule of expenditures of Federal awards did not include total amounts expended for each Federal program for which multiple awards with the same Catalog of Federal Domestic Assistance number were reported.
1 (50 percent) of 2 applicable charter school audit reports 3 (75 percent) of 4 applicable district school board audit reports
2011-12 FY Report Review Results
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2011-12 Fiscal Year Significant Financial Trends and
Findings Report
Report No. 2014-002
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2011-12 FY Financial Trends / Findings Results
County
Number of Charter Schools
2011-12
Miami-Dade 109 Broward 73 Hillsborough 36 Palm Beach 35 Orange 29 Polk 24 Lee 22 Duval 18 Pinellas 17 Alachua 16
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Charter schools meeting one or more of the conditions specified in
s. 218.503(1), F.S.:
Failure to pay short-term loans or make long-term debt
payments due to a lack of funds
Failure to pay uncontested claims within 90 days due to a lack
of funds
Failure to timely transfer withholding taxes or
employee/employer contributions for social security or
pension, retirement, or benefit plans due to a lack of funds
Failure to pay wages, salaries or retirement benefits due to a
lack of funds
2011-12 FY Financial Trends / Findings Results
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Deteriorating Financial Condition
Deteriorating financial condition means a
circumstance determined as of the fiscal year end that
significantly impairs a charter school’s ability to
generate enough revenue to meet its expenditures
without causing a condition described in Section
218.503(1), F.S., to occur.
Auditor noted deteriorating financial condition for 10
charter schools.
2009-10 FY Financial Trends / Findings Results
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2011-12 FY Financial Trends / Findings Results
Fund Balance or Net Assets:
Fiscal Year
2009-10 2010-11 2011-12
Average Ratio (percent) 16.2 17.8 16.4
Schools Above Average 141 153 162
Schools Below Average (positive balance) 214 267 279
Schools Below Average (negative balance) 39 25 58
Total 394 445 499
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58 (12 percent) of the 499 charter schools reported a deficit unassigned/assigned fund balance or unrestricted net assets for the general fund or other unrestricted fund at June 30, 2012.
In comparison, only 25 (6 percent) of the 445 charter schools in operation during the 2010-11 fiscal year reported a deficit at June 30, 2011.
2009-10 FY Financial Trends / Findings Results
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The audit reports for four charter schools included a statement by the respective CPAs regarding the ability of the charter school to continue operations on an ongoing basis.
2011-12 FY Financial Trends / Findings Results
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The audit reports for 145 charter schools included 273 audit findings addressing weaknesses in internal control, instances of noncompliance with applicable laws or rules, or additional matters that should be addressed by management.
These included 25 audit reports that included findings that were considered by the CPAs to be material weaknesses in internal control.
2011-12 FY Financial Trends / Findings Results
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Of the 273 findings reviewed, 159 (58 percent) did not include one or more of the elements required by Chapter 10.850, Rules of the Auditor General.
Criteria (what requires it?) Condition (what happened?) Cause (why did it happen?) Effect (what was the outcome?) Recommendation (how should it be fixed?)
2011-12 FY Financial Trends / Findings Results
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2011-12 FY Financial Trends / Findings Results
Of the 205 findings included in the 2011-12 fiscal year audit reports for charter schools in operation during the 2010-11 and 2009-10 fiscal years, 38 (19 percent) were repeated from the 2009-10 fiscal year audit reports
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Significant Findings
Audit findings of the greatest significance include
those that have a material impact on the fair
presentation of the financial statements and may
result in a modification of the independent
auditor’s opinion on the financial statements.
Modified Opinions include:
Qualified OpinionsAdverse OpinionsDisclaimers of Opinion
2011-12 FY Financial Trends / Findings Results
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Modified OpinionsOur review of audit reports for the 2011-12 Fiscal
Year disclosed 1 entities that contained a modified
opinion in the independent auditors report. Reason
for this included:
Qualified due to being unable to examine evidence
regarding compliance with laws, regulations,
contracts and grant agreements
2011-12 FY Financial Trends / Findings Results
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Categories of Significant Audit Findings
(excludes material weaknesses)
Separation of Duties (10)Policies and Procedures (9)Budget Administration (11)Records Management (70)Cash Controls(14)
2011-12 FY Financial Trends / Findings Results
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Categories of Significant Audit Findings
(excludes material weaknesses)
•Capital Assets (11)•Payroll and Personnel Administration (17)•Other Expenditures (17)•Charter Contract Compliance (28)•Miscellaneous Findings (15)
2011-12 FY Financial Trends / Findings Results
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Resources
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Resources
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Resources
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Resources
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Resources
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Resources
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Resources
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Resources
Local Government Reviews and Special Audits
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Audit Manager:
Marilyn Rosetti [email protected]
Audit Supervisor:
*David Ward [email protected]
Contact Info:
*Main telephone #850-412-2881
*Fax #850-487-4403
*DSB/charter school general e-mail address: [email protected]
*Web SIte:
www.myflorida.com/audgen