SubTitle4-236-1_4-236-30. State Single Audits, Title4 Management of State Agencies, Regulations of Connecticut State Agencies

Regulations of Connecticut State Agencies (Last Updated: June 14,2023)

Title4 Management of State Agencies

SubTitle4-236-1_4-236-30. State Single Audits

Sec. 4-236-1—4-236-17. [Repealed]

Latest version.

Repealed April 2, 2001.

Sec. 4-236-18. Definitions

Latest version.

(a) As used in sections 4-236-18 through 4-236-30, inclusive, of the Regulations of Connecticut State Agencies:

(1) "Auditee" means any nonstate entity, which is required to be audited pursuant to section 4-231 of the Connecticut General Statutes;

(2) "Questioned cost " means a cost that is questioned by the independent auditor because of an audit finding: (1) Which resulted from a violation or possible violation of a provision of law, regulation, contract, grant, or other agreement or document governing the use of State financial assistance, including funds used to match state financial assistance; (2) Where the costs, at the time of the audit, are not supported by adequate documentation; or (3) Where the costs incurred appear unreasonable, unrelated, or do not reflect the actions a prudent person would take in the circumstances; and

(3) "Working papers" has the same meaning as in Generally Accepted Government Auditing Standards (GAGAS).

(b) For the purpose of said sections 4-236-18 through 4-236-30, inclusive, the definitions in section 4-230 of the Connecticut General Statutes are also applicable.

(Adopted effective April 2, 2001)

Sec. 4-236-19. Applicability

Latest version.

(a) Any financial report involving an audit of a state financial assistance program shall be made pursuant to sections 4-230 through 4-236, inclusive, of the Connecticut General Statutes.

(b) Each independent auditor selected to provide audit services, pursuant to section 4-232 of the Connecticut General Statutes, shall issue an audit report in accordance with sections 4-236-23 through 4-236-30, inclusive of the Regulations of Connecticut State Agencies.

(Adopted effective April 2, 2001)

Sec. 4-236-20. Responsibilities of the secretary of the office of policy and management

Latest version.

The secretary shall, after consulting with applicable state agencies and representatives of nonstate entities, publish a Compliance Supplement disclosing statutory and regulatory requirements applicable to state financial assistance programs. The Compliance Supplement shall contain requirements for compliance with laws and regulations and suggested audit procedures for state financial assistance programs, and shall be updated periodically for program changes.

(Adopted effective April 2, 2001)

Sec. 4-236-21. Responsibilities of cognizant agencies, state agencies and non-state entities

Latest version.

(a) A cognizant agency shall:

(1) Provide technical advice and liaison to nonstate entities and independent auditors;

(2) Promptly inform other affected state agencies and appropriate state and local law enforcement officials of any direct reporting by the auditee or its auditor of irregularities or illegal acts, as required by GAGAS or laws and regulations;

(3) Advise the independent auditor and, where appropriate, the auditee of any deficiencies found in an audit report when the deficiencies require corrective action by the independent auditor. When advised of deficiencies, the auditee shall work with the independent auditor to take corrective action. If corrective action is not taken, the cognizant agency shall notify the independent auditor, the auditee, each agency having provided state financial assistance and each pass-through entity of the facts and make recommendations for follow-up action. In cases involving repetitive substandard performance or major inadequacies, the independent auditor may be referred to appropriate state and professional bodies for disciplinary action;

(4) Obtain or conduct quality control reviews of selected audits made by independent auditors of nonstate entities, at its discretion;

(5) Ensure the resolution of audit findings that affect the programs of more than one state agency;

(6) Coordinate, to the extent practical, audits or reviews made by or for state agencies that are in addition to the audits made pursuant to sections 4-236-23 and 4-236-26 of the Regulations of Connecticut State Agencies, so that the additional audits or reviews build upon audits performed in accordance with this part; and

(7) Inform a state awarding agency of an extension granted to an auditee for report submission.

(b) A state agency that provides state financial assistance shall:

(1) At the time of awarding state financial assistance to a nonstate entity, identify each state award made by informing the nonstate entity of the State Program Identification Number, award name, contract number, and award year. When some of this information is not available at the time the award is made, the State agency shall provide information necessary to clearly describe the State award;

(2) Advise nonstate entities of requirements imposed on them by state laws, regulations, and the provisions of contracts or grant agreements;

(3) Work with the cognizant agency to ensure that audits are completed and reports are received in a timely manner;

(4) Promptly notify the cognizant agency if audit reports are not submitted by the due date;

(5) Provide program related technical advice and counsel to nonstate entities and independent auditors as requested;

(6) Follow up on audit findings affecting a state agency's programs and ensure that the auditee takes appropriate and timely corrective action; and

(7) Assign a person the responsibility of providing annual updates of the Compliance Supplement to the secretary.

(c) A nonstate entity that is subject to the audit requirements of sections 4-230 through 4-236, inclusive, of the Connecticut General Statutes shall:

(1) Identify, in its records, any state financial assistance received, the program under which it is authorized, and the amounts expended. State program identification shall include, as applicable, the State Program Identification Number and program name, the contract number and year, the name of the state agency having awarded the assistance, and the name of the pass-through entity;

(2) Maintain internal control over state programs that provides reasonable assurance that the nonstate entity is managing state financial assistance in compliance with laws, regulations and the provisions of contracts or grant agreements that could have a material effect on each of its state programs;

(3) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each state program;

(4) Prepare appropriate financial statements, including a schedule of expenditures of state financial assistance, in accordance with section 4-236-23(a)(4) of the Regulations of Connecticut State Agencies;

(5) Ensure that each audit required by section 4-231 of the Connecticut General Statutes is properly performed and that each audit report is submitted when due;

(6) When notified of an extension to an audit report submission due date, promptly notify each applicable pass-through entity of the extension;

(7) Follow up on audit findings, prepare a corrective action plan and a schedule of prior audit findings in accordance with section 4- 236-24 of the Regulations of Connecticut State Agencies and take corrective action as necessary; and

(8) Promptly notify the cognizant agency and law enforcement officials of any violation of law including illegal acts and irregularities.

(Adopted effective April 2, 2001; Amended December 29, 2010)

Sec. 4-236-22. Basis for determining state financial assistance expended

Latest version.

Except in the case of an exempt program, the determination of when state financial assistance is expended shall be based on when the related program activity occurs. Generally, such an activity is one that a nonstate entity is required to take in order to comply with applicable laws, regulations and the provisions of contracts or grant agreements. Examples of such activities include expenditure/expense transactions associated with grants, cost-reimbursement contracts, direct appropriations or the use of loan proceeds, the disbursement of funds passed through to a subrecipient or the receipt or use of program income. State financial assistance which does not specify a required use and which cannot be described by any of the examples provided in this section shall be considered fully expended in the fiscal year in which the state financial assistance is paid by the State agency. Loans payable, the proceeds of which were received and expended in a year prior to that which an audit covers are not considered state financial assistance expended for purposes of this section.

(Adopted effective April 2, 2001)

Sec. 4-236-23. Audit scope and reporting

Latest version.

(a) Audits will be conducted based on the year-end of the nonstate entity. The independent auditor's report may be in the form of either combined or separate reports and may be organized differently from the manner presented in this section. The independent auditor's report shall state that the audit was conducted in accordance with this section and shall include the following:

(1) An opinion or disclaimer of opinion as to whether the financial statements are presented fairly in all material respects in conformity with generally accepted accounting principles and an opinion or disclaimer of opinion as to whether the schedule of expenditures of state financial assistance is presented fairly in all material respects in relation to the financial statements taken as a whole;

(2) A report on internal control related to the financial statements and on compliance with applicable laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements. This report shall describe the scope of the testing of internal control and the results of the tests. Where applicable, the report shall refer to the separate schedule of findings and questioned costs described in subdivision (5) of this subsection;

(3) A report on compliance with requirements applicable to each major program and internal control over compliance requirements in accordance with section 4-233 of the Connecticut General Statutes. This report shall include an opinion or disclaimer of opinion as to whether the auditee complied with applicable laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program. When appropriate, the report shall refer to the separate schedule of findings and questioned costs described in subdivision (5) of this subsection;

(4) A schedule of expenditures of state financial assistance. Such schedule, which shall be based on the fiscal year used for the nonstate entity's financial statements, shall include the following minimum information:

(A) A list of individual programs grouped by state agency;

(B) The total state financial assistance expended for each state program identified by State Program Identification Number. If the State Program Identification Number is not available, the contract number shall be used to identify the program;

(i) The auditee may include additional information. For example, when a state program has multiple award years, the auditee may list the amount of state financial assistance expended for each award year separately.

(D) To the extent practical, pass-through entities should identify in the schedule the total amount provided to subrecipients from each state program;

(E) The name of the pass-through entity and identifying number assigned by the pass-through-entity shall be included; and

(F) Notes that describe the significant accounting policies used in preparing the schedule. Such notes shall include the amount of loans and loan guarantees and shall disclose any changes in loan activity during the period being audited.

(5) A schedule of findings and questioned costs which shall include the following three components:

(A) A summary of the auditor's results which shall include:

(i) The type of report the auditor issued on the financial statements of the auditee (i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion);

(ii) Where applicable, a statement that significant deficiencies in internal control were disclosed by the audit of the financial statements and whether any such deficiencies were material weaknesses;

(iii) A statement as to whether the audit disclosed any noncompliance which is material to the financial statements of the auditee;

(iv) Where applicable, a statement that significant deficiencies in internal control over major programs were disclosed by the audit and whether any such deficiencies were material weaknesses;

(v) The type of report the auditor issued on compliance for major programs (i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion);

(vi) A statement as to whether the audit disclosed any audit findings, which the auditor is required to report under section 4-236-24 of the Regulations of Connecticut State Agencies;

(vii) An identification of major programs, including programs tested in accordance with section 4-233 of the Connecticut General Statutes; and

(viii) the dollar threshold used to distinguish between type A and type B programs as provided under the risk-based approach used in determining major state programs.

(B) Findings relating to the financial statements which are required to be reported in accordance with GAGAS; and

(C) Findings and questioned costs related to state financial assistance, including those set forth in subsection (a) of section 4-236-24 of the Regulations of Connecticut State Agencies.

(i) Audit findings that relate to the same issue (e.g., internal control findings, compliance findings, questioned costs, or fraud) should be presented as a single audit finding.

(ii) Audit findings that relate to both the financial statements and state financial assistance, as reported in subparagraphs (B) and (C) of this subdivision, should be reported in each appropriate section of the schedule. However, a report in one section of the schedule may be in summary form with a reference to the more detailed report in another section of the schedule.

(b) When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing or detecting noncompliance, the planning and performing of testing described in section 4-233 of the Connecticut General Statutes is not required for those compliance requirements. However, the independent auditor shall report a significant deficiency (including whether any such deficiency is a material weakness) in accordance with section 4-236-24 of the Regulations of Connecticut State Agencies, assess the related control risk at the maximum, and consider whether additional compliance tests are required because of ineffective internal control.

(1) The compliance requirements of various state programs may be ascertained by referring to the Compliance Supplement for state financial assistance programs.

(2) For those state programs not covered in the Compliance Supplement, the independent auditor shall use the types of compliance requirements contained in the Compliance Supplement as guidance for identifying the types of compliance requirements to test, and determine the requirements governing the state program by reviewing the provisions of contracts and grant agreements and the laws and regulations referred to in such contracts and grant agreements.

(3) The independent auditor may consider the Compliance Supplement a "safe harbor" for identification of compliance requirements to be tested for the programs included therein if, the independent auditor: (A) Performs reasonable procedures to ensure that the requirements in the Compliance Supplement are current and to determine whether there are any additional provisions of contract and grant agreements that should be covered by an audit in accordance with sections 4-236-18 through 4-236-30 of the Regulations of Connecticut State Agencies, inclusive, and (B) updates or augments the requirements contained in the Compliance Supplement, as appropriate.

(4) The compliance testing shall include tests of transactions and such other auditing procedures necessary to provide the independent auditor sufficient evidence to support an opinion on compliance.

(c) The independent auditor shall follow up on audit findings, perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee, and report as a current year finding, when the auditor concludes that the summary schedule materially misrepresents the status of any prior year audit finding. The independent auditor shall perform follow-up procedures regardless of whether a prior year audit finding relates to a major state program in the current year.

(Adopted effective April 2, 2001; Amended December 29, 2010)

Sec. 4-236-24. Audit findings

Latest version.

(a) The independent auditor shall report the following as audit findings in a schedule of findings and questioned costs:

(1) Significant deficiencies in internal control over major programs. The independent auditor's determination of whether a deficiency in internal control is a significant deficiency for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the Compliance Supplement. The independent auditor shall identify significant deficiencies, which are individually or cumulatively material weaknesses;

(2) Material noncompliance with the provisions of laws, regulations, contracts, or grant agreements related to a major program. The independent auditor's determination of whether a noncompliance with the provisions of laws, regulations, contracts, or grant agreements is material for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the Compliance Supplement;

(3) Known questioned costs which are greater than $1,000 for a type of compliance requirement for a major program. Known questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the determination of compliance, the auditor shall consider the best estimate of total costs questioned (likely questioned costs), not just the questioned costs specifically identified (known questioned costs). The auditor shall also report known questioned costs when likely questioned costs are greater than $1,000 for a type of compliance requirement for a major program. In reporting questioned costs, the auditor shall include information to provide proper perspective for judging the prevalence and consequences of the questioned costs;

(4) Known questioned costs which are greater than $1,000 for a state program which is not audited as a major program. Except for audit follow-up, the auditor is not required under this section to perform audit procedures for such a state program; therefore, the auditor will normally not find questioned costs for a program which is not audited as a major program. However, if the auditor does become aware of questioned costs for a state program which is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $1,000, then the auditor shall report this as an audit finding;

(5) The circumstances concerning why the independent auditor's report on compliance for major programs is other than an unqualified opinion, unless such circumstances are otherwise reported as audit findings in the schedule of findings and questioned costs for state financial assistance;

(6) Known fraud affecting state financial assistance, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for state financial assistance. This subdivision does not require the independent auditor to make an additional reporting when the independent auditor confirms that the fraud was reported outside of the independent auditor's report under the direct reporting requirements of GAGAS; and

(7) Instances where the results of audit follow-up procedures reveals that the summary of prior audit findings prepared by the auditee materially misrepresents the status of any prior audit finding.

(b) Audit findings shall be presented in sufficient detail for the auditee to prepare a corrective action plan and take corrective action and for state agencies and pass-through entities to arrive at a management decision in response to such findings. The following specific information, as applicable, shall be included in audit findings, which shall be numbered or otherwise separately identified in order to allow for ease of reference during follow-up:

(1) State Program Name and specific State Program Identification Number, name of state agency, and name of the applicable pass-through entity. When such information is not available, the independent auditor shall use the best information available to describe the state award;

(2) The criteria or specific requirements upon which the audit findings are based, including statutory, regulatory, or other citations;

(3) The condition found, including facts that support the deficiency identified in the audit findings;

(4) Identification of questioned costs and how they were computed;

(5) Information to provide proper perspective for judging the prevalence and consequences of the audit findings, such as whether they represent an isolated instance or a systemic problem. Instances identified shall be related to the universe and the number of cases examined, and shall be quantified in terms of dollar value;

(6) The possible asserted effect to provide sufficient information to the auditee and state agency, or pass-through entity in the case of a subrecipient, to permit them to determine the cause and effect to facilitate prompt and proper corrective action;

(7) Recommendations to prevent future occurrences of the deficiency identified in the audit findings; and

(8) Views of responsible officials of the auditee when there is disagreement with the audit findings, to the extent practical.

(c) The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee, upon completion of the audit, shall prepare a corrective action plan to address each audit finding included in the current year independent auditor's report. The corrective action plan shall provide the name(s) of the contact person(s) responsible for corrective action, the corrective action planned, and the anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan shall include a statement to that effect and specific reasons in support of such opinion. Said plan shall be included in the State Single Audit Reporting package. In addition, the auditee is responsible for preparing a schedule of prior audit findings which shall report the status of audit findings reported in the prior year's audit report.

(Adopted effective April 2, 2001; Amended December 29, 2010)

Sec. 4-236-25. Submission of reports

Latest version.

(a) The reporting package shall include audited financial statements, state single audit reports, including the applicable schedule(s) required under these regulations, reports prepared in accordance with GAGAS, a corrective action plan and a separately issued management letter, if applicable.

(b) Reports, including program audit reports, prepared in accordance with sections 4-236-23 and 4-236-26 of the Regulations of Connecticut State Agencies shall be submitted by the auditee to the cognizant agency and, if applicable, state grantor agencies and pass-through entities. Reports shall be submitted no later than six months after the end of the period under audit, pursuant to section 4-232 of the Connecticut General Statutes.

(c) The cognizant agency may authorize extensions in the filing due date in accordance with section 4-232 of the Connecticut General Statutes. At no time may the extension exceed six months. The cognizant agency shall notify those state agencies providing state financial assistance to the nonstate entity of the extension.

(Adopted effective April 2, 2001; Amended December 29, 2010)

Sec. 4-236-26. Program specific audits

Latest version.

(a) In some cases, a program-specific audit guide will be available to provide specific guidance to the independent auditor with respect to internal control, compliance requirements, suggested audit procedures, and audit reporting requirements. The independent auditor shall contact the state agency awarding the funds to determine whether such a guide is available. When a current program-specific audit guide is available, the independent auditor shall follow GAGAS and the guide when performing a program-specific audit. Report submissions shall follow the requirements identified in the program-specific audit guide.

(b) When a program-specific audit guide is not available, the auditee and independent auditor shall have basically the same responsibilities for the state program as they would have for an audit of a major program in a single audit of state financial assistance. In such cases the following is required:

(1) The auditee shall prepare the financial statement(s) for the state program that includes, at a minimum, a schedule of expenditures of state financial assistance for the program and notes that describe the significant accounting policies used in preparing the schedule, a summary schedule of prior audit findings and a corrective action plan consistent with the requirements of section 4-236-24(c) of the Regulations of Connecticut State Agencies.

(2) The independent auditor shall:

(A) Perform an audit of the financial statement(s) for the state program in accordance with GAGAS;

(B) Obtain an understanding of internal control and perform tests of internal control over the state program consistent with the requirements of section 4-233 of the Connecticut General Statutes, for a major program;

(C) Perform procedures to determine whether the nonstate entity has complied with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on the state program consistent with the requirements of section 4-233 of the Connecticut General Statutes; and

(D) Prepare report(s) in the form of either combined or separate reports, which may be organized differently from the manner presented in this section. The independent auditor's report(s) shall state that the audit was conducted in accordance with this section and shall include the following:

(i) An opinion (or disclaimer of opinion) as to whether the financial statement(s) of the state program is presented fairly in all material respects in conformity with the stated accounting policies;

(ii) A report on internal control related to the state program, which shall describe the scope of testing of internal control and the results of the tests;

(iii) A report on compliance which includes an opinion (or disclaimer of opinion) as to whether the nonstate entity complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on the state program; and

(iv) A schedule of findings and questioned costs for the state program that includes a summary of the independent auditor's results relative to the state program consistent with the requirements of section 4-236-23 of the Regulations of Connecticut State Agencies.

(c) The reports identified in this section shall be submitted in accordance with the provisions of section 4-236-25 of the Regulations of Connecticut State Agencies.

(Adopted effective April 2, 2001; Amended December 29, 2010)

Sec. 4-236-27. Illegal acts

Latest version.

If, during or in connection with an audit of a nonstate entity, the independent auditor becomes aware of illegal acts or irregularities, such acts shall be reported in accordance with the provisions of GAGAS.

(Adopted effective April 2, 2001)

Sec. 4-236-28. Penalty for noncompliance

Latest version.

No audit costs shall be charged to state programs when audits required by the State Single Audit Act have not been made or have been made but not in accordance with sections 4-236-23 and 4-236-26 of the Regulations of Connecticut State Agencies. In cases of continued inability or unwillingness to have a proper audit conducted in accordance with sections 4-236-23 and 4-236-26 of the Regulations of Connecticut State Agencies, state agencies shall consider appropriate sanctions including, but not limited to: (1) Withholding a percentage of financial assistance until the audit is completed satisfactorily; (2) Withholding or disallowing overhead costs; or (3) suspending state financial assistance until the audit is completed.

(Adopted effective April 2, 2001)

Sec. 4-236-29. Audit resolution and recovery of state program funds based on audit findings

Latest version.

(a) As provided in section 4-236-21 of the Regulations of Connecticut State Agencies, the cognizant agency shall be responsible for ensuring the resolution of audit findings that affect the programs of more than one state agency. Resolution of findings that relate to the programs of a single state agency shall be the responsibility of the recipient and the agency. Alternate arrangements may be made on a case-by-case basis by agreement among the agencies concerned.

(b) After the audit report is accepted by the cognizant agency, the grantor state agencies shall review the audit report including the audit findings relating to the agencies' programs and the auditee's corrective action plans. Pass-through entities are also responsible for reviewing the audit reports of their subrecipients.

(c) State grantor agencies shall follow up on audit findings to ensure proper resolution. Follow up procedures regarding a current year or prior year audit finding may include, but are not limited to, communication with the nonstate entity and review of the nonstate entity's records. Pass-through entities shall work with state grantor agencies and develop a course of action to resolve audit findings relating to state financial assistance provided to subrecipients.

(d) Agencies shall determine whether to "allow" or "disallow" the reported expenditures in findings involving questioned costs.

(1) If the state grantor agency decides the expenditures were proper (i.e., the independent auditor's questioned costs are not sustained), they are "allowed costs" and no further action is required.

(2) If the state grantor agency decides the expenditures were improper (i.e., the independent auditor's findings are sustained), the nonstate entity shall consider the questioned costs to be ineligible; they are "disallowed costs".

(3) The state grantor agency shall notify the nonstate entity of any disallowed costs, and, unless successfully appealed to the executive authority of the agency, the state financial assistance received with respect to such disallowed costs shall be returned to the applicable state government agency. The state agencies shall also establish an accounting record of the debt, require other necessary corrective actions, and follow-up on corrective actions to ensure compliance.

(Adopted effective April 2, 2001)

Sec. 4-236-30. Retention of working papers and reports

Latest version.

The independent auditor shall document in the working papers the risk analysis process used in determining major state programs. Following completion of an audit, the independent auditor shall make available working papers, upon request, to the cognizant agency, its designee, the Auditors of Public Accounts and awarding agencies. Awarding agencies shall notify the cognizant agency of their intent to review working papers. The independent auditor shall retain working papers and reports for a minimum of five years from the date of filing a certified copy of the audit report with the cognizant agency, unless the independent auditor is notified in writing by the cognizant agency to extend the retention period.

(Adopted effective April 2, 2001; Amended December 29, 2010)