Current through Register Vol. 49, No. 6, March 15, 2024
PURPOSE: The purpose of this proposed amendment is
providing clarity to the rule, updating terminology, incorporating federal
references into the regulation, and changing the responsible section for
reviewing audits within the Department of Elementary and Secondary Education
(department). This amendment does not make substantive changes to Local
Education Agencies' (LEAs') requirements.
PURPOSE: This rule establishes a comprehensive policy
for public local education agencies (LEAs). This policy outlines the purposes
of audits, the responsibilities various parties have in the audit and the audit
review process, relationships in this process, minimum audit requirements, and
procedures the Department of Elementary and Secondary Education (department)
follows in resolving any question or problem which may be disclosed by the
audit
(1) For the purpose of
this rule, unless the context clearly requires otherwise, the following terms
shall mean:
(A) Local Education Agency (LEA).
Public school district or charter school and, for the purpose of this rule,
charter school includes non-LEA charter schools; and
(B) Board. Public school district board of
education or charter school board of directors.
(2) Audits of LEAs are primarily intended to
express an auditor's opinion on the fairness of presentation of the financial
statements. Audits also provide an independent review of financial operations,
systems of internal control, and compliance with relevant state and federal
laws and regulations.
(A) The financial
statements must be prepared in accordance with the Generally Accepted
Accounting Principles (GAAP), (accrual basis); or Other Comprehensive Basis Of
Accounting (OCBOA) such as cash, modified cash, or modified accrual; or a basis
of accounting required by state law.
(3) Responsibilities in the audit process are
shared by the board, the independent auditor contracted by the board, and the
Department of Elementary and Secondary Education (department).
(4) The board's responsibilities are as
follows:
(A) Each board is responsible for
defining an appropriate scope of the audit.
1. At a minimum, the audit must include the
LEA's:
A. General, special revenue, debt
service, and capital projects funds;
B. Fiduciary funds;
C. Proprietary funds; and
D. Component units (unless a component unit
issues its own audited financial statements).
2. A Single audit of federal funds expended
by the LEA may be required. State law provides for the acceptance of federal
acts and funds and for its necessary administration and supervision. Audit
requirements are a part of federal acts and the implementing regulations
adopted by the administering federal agencies.
A. All LEAs that expend a total amount of
federal awards equal to, or in excess of, the amount specified in Office of
Management and Budget (OMB) Uniform Grant Guidance 2 CFR Part 200 as the single
audit threshold or such other amount specified by the federal director of the
OMB in any fiscal year shall either have a single audit or a program-specific
audit made for such fiscal year in accordance with the requirements of The
Single Audit Act Amendments of 1996, OMB Uniform Grant Guidance 2 CFR Part 200
and the Government Auditing Standards.
B. All LEAs that expend a total amount of
federal awards of less than the amount specified in OMB Uniform Grant Guidance
2 CFR Part 200 as the single audit threshold or such other amount specified by
the director of the OMB in any fiscal year shall be exempt for such fiscal year
from compliance with The Single Audit Act Amendments of 1996. However, the LEA
must make the records available for review or audit by appropriate officials of
the appropriate federal agency, department, and the Government Accountability
Office (GAO). Also, these LEAs shall be required to have an audit performed in
accordance with Government Auditing Standards.
3. All audits shall be single entity reports
completed based on a July 1 to June 30 fiscal year on an annual basis except
for non-LEA charter schools that are part of an LEA. Non-LEA charter schools
that are part of an LEA shall have an independent audit report as a single
entity separate from the LEA audit report.
4. LEAs that cease operations are not exempt
from the audit requirements. A final audit of the LEA's activities through the
date it ceases operations must be performed and submitted to the department as
otherwise described in this rule;
(B) Each board is responsible for procuring
audit services. Audit services should be competitively bid in accordance with
LEA procurement policy.
1. Each board is
responsible for procuring an independent auditor who holds a current permit to
practice public accounting in the state of Missouri and meets the requirements
for continuing professional education and peer review, as defined by the
regulations of the Missouri State Board of Accountancy and Government Auditing
Standards. Subcontractors must also meet these requirements.
2. When the board requests proposals for
audit services, the objectives and scope of the audit must be made clear. The
LEA must request a copy of the audit organization's peer review report, which
the auditor is required to provide under the Government Auditing
Standards.
3. Auditors performing
single audits pursuant to OMB Uniform Grant Guidance 2 CFR Part 200 must not be
suspended or debarred from doing business with the federal
government;
(C) The
board audit report shall be submitted to the department by LEA officials no
later than December 31 of each year. If the audit is not received by the
deadline, all funds disbursed by the department to the LEA may be withheld
until the audit is received;
(D)
The board is responsible for transmitting one (1) copy of the board-approved
audit report; the related management letter, if one is prepared by the
independent auditor; all other documentation or records as required by the
department; a copy of the final approved signed board minutes or board
resolution, indicating approval of the audit report to the department; and
other copies of the audit report as required by federal laws and regulations to
the appropriate agency(ies). The management letter (if applicable) and a copy
of the final approved signed board minutes or board resolution indicating
approval of the audit report must be received by the department before the
audit file is considered complete for the fiscal year.
1. The audit report related management
letter, and copy of the final approved signed board minutes or board resolution
must be submitted electronically to the department by the board as designated
by the department. All signatures that would normally be included on the hard
copy document must be present on the electronic document. Documents with
scanned signatures are acceptable. Copies of unsigned audit reports, management
letters, or board minutes or resolutions are not acceptable.
2. Revisions to an audit report may also be
submitted electronically to the department but must be accompanied by a signed
statement from the independent auditor on the firm's letterhead explaining the
reason for the revision;
(E) LEAs that have a single audit performed
and have federal findings or questioned costs shall submit the LEA's Corrective
Action Plan prepared in accordance with OMB Uniform Grant Guidance 2 CFR Part
200 with their audit report and management letter as stated above.
1. The corrective action plan must be
included with the audit report;
(F) The board must notify the department's
Financial and Administrative Services Division if fraud or embezzlement is
discovered during the course of the audit;
(G) The board must prepare financial
statements that reflect its financial position, notes to the financial
statements, and assertions related to compliance with state and federal laws
and regulations;
(H) Each board is
responsible for ensuring implementation of audit recommendations as appropriate
and resolving any questions or discrepancies disclosed by the audit or noted by
the department; and
(I) The board
is responsible for the accuracy of the audited financial statements.
(5) The independent auditor is
responsible for conducting the audit in accordance with generally accepted
auditing standards, government auditing standards, federal audit requirements,
and the department audit guidelines as contained or referenced in this rule;
submitting the audit report to the client board; and assisting in resolving
questions or problems that may be disclosed by the audit. Depending on the
contract or agreement the LEA has with its independent auditor, this assistance
may require additional compensation to be paid to the auditor.
(A) LEA audits must contain at a minimum the
following:
1. A statement of the scope of
examination;
2. A statement as to
whether the audit was conducted in accordance with generally accepted auditing
standards and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United
States;
3. The independent
auditor's opinion as to whether the financial statements included in the audit
report present fairly the results of the operations during the period
audited;
4. A statement as to
whether the financial statements accompanying the audit report were prepared in
accordance with generally accepted accounting principles or another
comprehensive basis of accounting;
5. The reason or reasons an opinion is not
rendered in the event the independent auditor is unable to express an opinion
with respect thereto;
6. Except for
charter schools, the independent auditor's opinion as to whether the LEA's
budgetary and disbursement procedures conform to the requirements of Chapter
67, RSMo;
7. The independent
auditor's opinion as to whether attendance and transportation records are so
maintained by the LEA as to disclose accurately average daily attendance and
average daily transportation of pupils during the period of the
audit;
8. The schedule of selected
statistics, as specified annually by the department; and
9. Financial statements presented in such
form as to disclose the operations of each fund of the LEA and a statement of
the operations of all funds.
(6) The department has the general
responsibility to receive and review audits and to verify that minimum audit
requirements have been met. Specific responsibilities within the department are
assigned as follows:
(A) Questions regarding
audit reports and any audit problems, discrepancies, or findings are generally
resolved by the department directly with the administrative staff at the LEA.
However, in some cases, department staff may communicate directly with the
LEA's auditor. Department staff may communicate with the federal cognizant
agency (typically, the U.S. Department of Education) regarding compliance with
various federal requirements. The cognizant agency has the authority to make
periodic contacts with LEA officials and their auditors regarding specific
questions, audit deficiencies, or review of the audit process; and
(B) The department is responsible for
reviewing the audit reports for general acceptability in accordance with state
and federal guidelines.
1. Department staff
preliminarily review the audit to determine if the audit generally conforms to
state and federal requirements referenced in this rule.
2. LEAs that receive an audit with a
disclaimer of opinion shall institute corrective measures to ensure that the
subsequent audit does not contain a disclaimer of opinion. If a disclaimer of
opinion is rendered on the subsequent audit, the audit shall be deemed
unacceptable and all funds disbursed by the department to the LEA may be
withheld until such time as the LEA demonstrates to the department that the
situation resulting in the disclaimer of opinion has been corrected by the
LEA.
3. Audit reports containing an
adverse opinion are evaluated by department staff. Depending on the reasons for
the adverse opinion, the department may require the LEA to provide evidence
that corrective action has been or is being taken to eliminate the adverse
opinion from future reports. If corrective action is not taken as deemed
necessary by the department and an adverse opinion is rendered on the
subsequent audit, the audit shall be deemed unacceptable and all funds
disbursed by the department to the LEA may be withheld until such time as the
LEA demonstrates to the department that the situation resulting in the adverse
opinion has been corrected by the LEA.
4. Department staff will review a sample of
audits via a formal desk review for adherence to the appropriate audit
requirements (The Single Audit Act Amendments of 1996; OMB Uniform Grant
Guidance 2 CFR Part 200 ; Government Auditing Standards, as well as the state
requirements) included or referenced in this rule.
A. Any deficiencies with the audit, during
this phase, are communicated to LEA officials and/or the independent auditor
depending on the severity and type of deficiency noted. Resolution of desk
review items should occur within the time frame provided by the department in
the written communication with the LEA or the independent auditor. Failure to
address noted deficiencies may result in the withholding of funds disbursed by
the department to the LEA. Severe deficiencies and/or inaction by the LEA's
independent auditor may result in the reporting of the independent auditor to
the Missouri State Board of Accountancy.
B. Review of the independent auditor's
working papers may be conducted by the department as deemed appropriate to
ensure appropriate work has been performed to support statements, opinions,
findings of the independent auditor. Auditors may be requested to provide their
most recent peer review report to the department.
5. For audits conducted in accordance with
OMB Uniform Grant Guidance 2 CFR Part 200, federal findings and questioned
costs and the related Corrective Action Plan are circulated to the appropriate
department program sections for follow-up with the LEA.
A. The program sections, both federal and
state, are responsible for addressing relevant portions of the audit including
follow-up with LEA officials and their independent auditors to resolve any
questions, discrepancies, or audit findings.
B. The appropriate program section shall
issue a written management decision to the LEA indicating approval/disapproval
of the LEA's Corrective Action Plan. This must take place within six (6) months
from the receipt of the audit.
C.
When the program section review suggests questions or discloses discrepancies,
the individual program section corresponds directly with the LEA. This
correspondence initiates a procedure for resolving program audit questions and
discrepancies which is outlined below:
(I)
Personnel of the various program sections advise the LEA officials of the
findings and the nature of any discrepancy found in the audit report;
(II) Within the time frame provided by the
department, LEA officials are expected to respond with clarifying information
and, as appropriate, corrected data or a corrected page of the audit report
issued by the independent auditor who conducted the original audit. Department
staff assist in every reasonable way to help a LEA and/or its independent
auditor find a solution to audit problems; and
(III) If a discrepancy cannot be resolved,
the department may recover or withhold applicable state or federal funds from
the affected program.
(7)
The Single Audit Act Amendments
of 1996, 62 FR 35278-35319, and the Office of Management and Budget
(OMB) Uniform Grant Guidance, 2 CFR Part 200, are hereby incorporated by
reference and made a part of this rule as published by the Office of the
Federal Register, April 2022, and are available by contacting the Office of
Administration, Publications Office, Room 2200, New Executive Office Building,
Washington, DC. Copies of these regulations can also be obtained from the
Department of Elementary and Secondary Education, Division of Financial and
Administrative Services, 205 Jefferson Street, PO Box 480, Jefferson City, MO
65102-0480 and at
https://dese.mo.gov/governmental-affairs/dese-administrative-rules/incorporated-reference-materials.
This rule does not incorporate any subsequent amendments or
additions.
(8) The
Government Auditing Standards, issued by the Comptroller
General of the United States, are hereby incorporated by reference and made a
part of this rule as published by the U.S. Government Accountability Office,
441 G St. NW, Washington, DC 20548, April 2022. Copies of these regulations can
also be obtained from the Department of Elementary and Secondary Education,
Division of Financial and Administrative Services, 205 Jefferson Street, PO Box
480, Jefferson City, MO 65102-0480 and at
https://dese.mo.gov/governmental-affairs/dese-administrative-rules/incorporated-reference-materials.
This rule does not incorporate any subsequent amendments or additions
*Original authority: 160.405, RSMo 1998, amended 2005;
161.092, RSMo 1963, amended 1973, 2002, 2003; 165.121, RSMo 1963; 167.201, RSMo
1963; and 178.430, RSMo 1963.
