1. Local Government Accountability Update FGFOA Annual Conference June 25, 2013

2. Topics for Discussion Laws, Rules, and Guidance Update AG Audits of Local Governments Lessons from AG Audits of Local Governments 2

3. 2013 Legislation  Chapter 2013-36, Laws of Florida – Ethics Comprehensive reform bill – includes:  Allows Commission on Ethics (COE) to collect unpaid financial disclosure fines by garnishment of wages and filing a lien on the filer’s real property.  Requires COE to publish certain financial disclosure filings online beginning with the 2012 filings.  Clarifies that only those that have the authority to purchase more than $10,000 in a year are “procurement employees.”  Prohibits financial disclosure filers to accept gifts in excess of $100 from “vendors” and vendor gifts valued between $25 and $100 must be reported. 3

4. 2013 Legislation  Chapter 2013-36, Laws of Florida – Ethics Comprehensive reform bill – includes:  Permits Commission on Ethics to initiate investigations based on referral from Governor, Florida Department of Law Enforcement, a law enforcement agency, or a state attorney.  Requires constitutional officers to complete a minimum 4 hours of training for ethics, open meetings, and public records laws.  Prohibits an elected public officer or candidate for elected public office, during period of candidacy, from obtaining new public employment after qualifying for elected public office. 4

5. 2013 Legislation  SB 1512 – Clerks of Court  Increases revenues to allow clerks to be fully funded from court-related collections.  Clerks must submit proposed budgets to Clerks of Court Operations Corporation (CCOC) by June 1 (beginning 2014).  CCOC to submit clerks’ budgets to Legislative Budget Commission by August 1 (beginning in 2014) for approval, disapproval, or amendment.  Specifies total budgeted expenditures for all clerks for the period July 1, 2013 thru September 30, 2014. 5

6. 2013 Legislation  SB 328 – Public Accountancy  Amends Section 473.3065, Florida Statutes, 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, Florida Statutes, 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. 6

7. 2013 Legislation  Chapter 2013-39, Laws of Florida – Department of Economic Opportunity  Creates the Gulf Coast Economic Corridor Act in support of areas affected by the Deepwater Horizon disaster.  Creates Triumph Gulf Coast, Inc. as a nonprofit corporation to administer a Recovery Fund.  Establishes the Recovery Fund for the benefit of disproportionately affected counties (Bay, Escambia, Franklin, Gulf, Okaloosa, Santa Rosa, Walton, and Wakulla). 7

8. 2013 Legislation  Chapter 2013-39, Laws of Florida – Department of Economic Opportunity  Requires the scope of local government financial audits to include a review of funds received or expended related to the Deepwater Horizon oil spill to, at a minimum, evaluate compliance with State and Federal laws related to the expenditure of those funds.  Requires Auditor General to adopt rules for the form and conduct of all financial audits performed by CPAs for audits of local governmental entities for oil spill funds received/expended. 8

9. Anticipated AG Chapter 10.550 Rule Changes  Rules for local government and Florida Single Audit Act audits should be available for comment in mid-July (Chapters 10.700, 10.800, and 10.850 have been revised for 2013 audits).  Update for 2013 laws and authoritative literature.  Delete references already addressed within the requirements of OMB Circular A-133 or Government Auditing Standards.  Simplify description of auditor’s report on financial statements and report on internal control and compliance. 9

10. Anticipated AG Chapter 10.550 Rule Changes  Update rules to clarify audit finding reference numbering requirements.  Must have a reference number.  Still required to indicate those findings included in the preceding and second preceding year – including the reference numbers applicable.  Update to implement requirements of Chapter 2013-39, Laws of Florida, for audits of local governments that receive/expend Deepwater Horizon oil spill funds. 10

11. 2013 Guidance Changes  New example financial indicators  Government-wide  Change in Net Assets (Net Position)  Capital Asset Condition  General Fund  Fund Balance as a % of Expenditures  Quick Ratio  Pension and OPEB  Funded Ratio  Re-ordering of data elements and financial indicators  Available with the December 2013 updates (See FGFOA Webinar presentation of May 16, 2013) 11

12. Auditor General Audits of Local Governments 12

13. Operational Audit  Section 11.45(1)(g), Florida Statutes, defines an operational audit as an audit whose purpose is to evaluate management’s performance in establishing and maintaining internal controls, including controls designed to prevent and detect fraud, waste, and abuse, and in administering assigned responsibilities in accordance with applicable laws, administrative rules, contracts, grant agreements, and other guidelines. Operational audits must be conducted in accordance with government auditing standards. Such audits examine internal controls that are designed and placed in operation to promote and encourage the achievement of management’s control objectives in the categories of compliance, economic and efficient operations, reliability of financial records and reports, and safeguarding of assets, and identify weaknesses in those internal controls. 13

14. Operational Audit  Why pay attention to AG audits of local governments?  Different scope than financial audits  Compliance requirements applicable to operations of your entity that may not be covered in a financial audit  Controls that apply to those operations  Economic/efficiency ideas  Good business practices  Improve financial management of your entity 14

15. What can be learned from recent local government operational audits? Reports available on AG Web site: www.myflorida.com/audgenwww.myflorida.com/audgen Under Auditor General Released Reports, By Entity Type, Local Government/Nonprofit 15

16. Audit Findings Why are contracts important?  Provide descriptions of the responsibilities of each party  Provide a basis for making payments  Protects each party What should be included in contracts?  All key terms should be defined  Responsibilities of each party should be clear  Specific deliverables or other necessary information should be stated that provide a basis for payment or billing Contracts should be updated periodically to incorporate changes in terms 16

17. Audit Findings Some issues we have noted:  Contracts needed to be updated and consolidated – original contract was in 1977 and had modifications through 2005 Arduous to determine what contracts require Outdated provisions  Contracts did not specify the basis or methodology for calculating some costs to be billed  Contracts did not address some issues 17

18. Audit Findings What happens when contractors, which obtain and pay for services from other organizations on behalf of the government, are not required to provide supporting documentation with reimbursement requests?  No proof that the goods/services were obtained  No proof that amounts paid were those paid by the contractor to the provider  No proof that a public purpose was served 18

19. Audit Findings What we found or what we know happened: 19

20. Audit Findings What we found/what happened: 20

21. Audit Findings Other contract issues:  Contract award process was not in accordance with Board policies and procedures  Contracts did not require advertising firms to follow Board procurement policies  Advertising firms were not required to provide cost estimates  Inadequate preaudit of expenditures by Board and Clerk staff  Inadequate monitoring of payments pursuant to the contracts (some payments made for services already included in fixed fee payments to the contractors) 21

22. Audit Findings Other issues related to this audit:  No anti-fraud program or control risk assessments  Lack of budgetary control established by the Board At the level of restriction At the project level  Overexpenditures of tourist development taxes  Unauthorized expenditures of tourist development taxes  Insufficient oversight of tourist development tax expenditures by the TDC 22

23. Audit Findings Other issues related to this audit:  Conflicts of interest were not identified Board member also Executive Director of Chamber of Commerce that received funds TDC Committee member was owner or director of company receiving promotional money TDC Subcommittee member was president of a company paid for aerial advertising  Payments made in advance, some services never received 23

24. Questions? 24

25. Marilyn Rosetti, Audit Manager marilynrosetti@aud.state.fl.us Telephone: 850-487-9031 Web site: www.myflorida.com/audgen/www.myflorida.com/audgen/ Headquarters: 111 West Madison Street Room 401 Pepper Building Tallahassee, FL 32399-1450 Florida Auditor General 25