Sec.4-236-24. Audit findings

(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)