Arkansas Administrative Code
Agency 005 - DEPARTMENT OF EDUCATION
Division 01 - Division of Fiscal and Administrative Services
Rule 005.01.10-008 - ADE 306: Publicly Funded Educational Institution Audit Requirements

1.01 The Arkansas State Board of Education's authority for promulgating these Rules is pursuant to Ark. Code Ann. §§ 6-1-101; 6-11-105; 6-12-112; 6-13-1020; 6-13-1608; 6-17-426; 6-20-1801 through 6-20-1804; 6-20-1806; 6-20-1905 and 10-4-413.

1.02 These Rules shall be known as the Arkansas Department of Education (ADE) Rules Governing Publicly Funded Educational Institution Audit Requirements.

2.01 The purpose of these Rules is to establish the requirements for the completion, filing, and review of financial audits for all publicly funded educational institutions, including but not limited to, Arkansas school districts, open-enrollment public charter schools, and education service cooperatives (auditees).

3.01 The accounts of all publicly funded educational institutions shall be audited annually by the Arkansas Division of Legislative Audit (Legislative Audit) or a private independent certified public accountant (private auditor).

3.02 The financial statements shall be presented on a fund basis format, and as a minimum, the general fund and the special revenue fund presented separately and all other funds included in the audit presented in the aggregate.

3.03 The financial statements shall consist of the following

3.04 The report shall include as supplemental information a schedule of capital assets, including:

3.05 The governing body of a school may require its annual financial audit to be performed and financial statements to be presented in accordance with guidelines prescribed by the Governmental Accounting Standards Board, the American Institute of Certified Public Accountants, and the United States Government Accountability Office as an alternate basis of presentation to that listed in 3.03 through 3.04 of this Rule.

3.06 The report must include information on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Governmental Auditing Standards.

4.01 A private independent audit not conducted by Legislative Audit shall include at a minimum, review, comments, and findings on substantial compliance with laws governing each of the following as listed in Ark. Code Ann. § 6-1-101:

4.02 Audit reports shall be presented to the School Board or governing body of the auditees in a format as prescribed by professional accounting organizations.

4.03 All annual audits of auditees NOT conducted by Legislative Audit shall be completed and filed with the ADE and Legislative Audit within nine (9) months following the end of each fiscal year.

4.04 By January 31 of the calendar year following the due date of the audit, the ADE shall notify by certified mail any auditee failing to file the required audit that the entity is considered to be in fiscal distress.

4.05 The ADE shall place certified public accountants or accounting firms on an ineligible list for a determined period of time, but not more than five years from the end of the fiscal year for which the audit report was contracted to be prepared, for any of the following reasons:

4.06 Auditees should check the list of ineligible certified public accountants or accounting firms maintained by the ADE before entering into a contract for audit services.

4.07 A certified copy of the audit shall be distributed to the school district, the Department of Finance and Administration, the Department of Workforce Education, and the ADE.

4.08 The annual financial audit shall be filed by the auditor directly to the Arkansas Legislative Auditor within ten (10) days of issuance of the audit report to the school board.

4.09 If the ADE or the Legislative Joint Auditing Committee is concerned that an audit may be substandard or seriously questionable with respect to applicable professional auditing standards, the ADE or the Legislative Joint Auditing Committee may file a complaint with the Arkansas State Board of Public Accountancy.

4.10 Each education service cooperative is subject to an annual audit by the Legislative Joint Auditing committee.

4.11 Licensed accountants shall not provide non-audit services to a school district, education service cooperative, or open-enrollment public charter school if the licensed account or his or her firm is also the auditor of the school district, education service cooperative, or open-enrollment public charter school. Non-audit services include:

5.01 Legislative Audit has the authority to audit the books of any school district, open-enrollment public charter school, and education service cooperative at the request of a fiscal officer, school district, county, or state school official.

5.02 Audit reports shall include all findings, comments, recommendations and management letters. They shall be made available to the ADE and the Department of Workforce Education upon presentation to the Legislative Joint Auditing Committee.

5.03 Legislative Audit shall provide copies of every audit report performed on each school district to the county clerk of the county in which the auditee is located.

5.04 Legislative Audit shall annually provide the ADE with a list of public educational entities audited by Legislative Audit and update the ADE on any changes throughout the year.

6.01 Audit reports, along with accompanying comments and recommendations, shall be reviewed at the first regularly scheduled school board or governing body meeting following receipt of the audit report if the audit report is received by the school board prior to ten (10) days before the regularly scheduled meeting. If the audit report is received by the board or governing body within ten (10) days before a regularly scheduled meeting, the report may be reviewed at the next regularly scheduled meeting after the ten-day period.

6.02 The school board or governing body of the auditee shall take appropriate action relating to each audit finding and recommendation within the audit report. The minutes of the meeting shall document the review of the audit and action taken by the board or governing body.

7.01 If a district has been identified as being in fiscal distress by June 30 of any year, the annual audit shall be completed and filed with the ADE and the Legislative Joint Auditing Committee within six (6) months following the end of each fiscal year.

8.01 The district that is involved in the administrative consolidation or annexation shall have an audit started within thirty (30) days of the closing of the books by the school district.

9.01 The Legislative Joint Auditing Committee may refer an audit report of a school district to the ADE if the report identifies a substantial issue of noncompliance with state or federal financial or other reporting requirements, and the same issue has been identified in two (2) consecutive audit reports.

9.02 The ADE shall submit the audit report referred in 9.01 of this section to the Professional Licensure Standards Board in forms approved by the ADE.