Each county, municipality, and special taxing district shall adopt the fiscal year specified in § 16–101 of this title as its period for recording and reporting its fiscal transactions.

Each county, municipality, and special taxing district shall maintain its financial records by a method that allows for the recording and reporting of all information contained in them for the fiscal year adopted under § 16–301 of this subtitle.

Each county, municipality, and special taxing district shall maintain the uniform system of financial reporting established by the Department of Legislative Services. If a county, municipality, or special taxing district does not comply with subsection (a) of this section, the Comptroller, after notice from the Executive Director of the Department of Legislative Services of the noncompliance, may order the discontinuance of all money, grants, or State aid that the county, municipality, or special taxing district is entitled to receive under State law, including money from: the income tax; the tax on racing; the recordation tax; the admissions and amusement tax; and the license tax.

Except as provided in paragraph (2) of this subsection, on or before October 31 after the close of its fiscal year, each county, municipality, and special taxing district shall file with the Department of Legislative Services a financial report for that fiscal year. A county, municipality, or special taxing district with a population of over 400,000 may file its financial report on or before December 31 after the close of its fiscal year. Unless subparagraph (i) of this paragraph applies, Howard County may file its financial report on or before November 30 after the close of its fiscal year. Allegany County, Calvert County, Caroline County, Cecil County, Charles County, Frederick County, Garrett County, Queen Anne’s County, St. Mary’s County, Somerset County, Talbot County, and Wicomico County may file the county’s financial report on or before December 31 after the close of the county’s fiscal year. The financial report required under subsection (a) of this section shall be: prepared on the form established by the Department of Legislative Services; and verified by the chief executive officer of the county, municipality, or special taxing district. If a county, municipality, or special taxing district does not comply with subsection (a) of this section, the Comptroller, on notice from the Executive Director of the Department of Legislative Services, may order the discontinuance of all money, grants, or State aid that the county, municipality, or special taxing district is entitled to receive under State law, including money from: the income tax; the tax on racing; the recordation tax; the admissions and amusement tax; and the license tax.

Except as provided in subsection (b) of this section, each county, municipality, and special taxing district created by the State shall have its financial records audited at least once each fiscal year by the persons and for the purposes specified in this section and §§ 16–307 and 16–308 of this subtitle. Unless the Legislative Auditor determines, on a case–by–case basis, that more frequent audits are required, the Legislative Auditor may authorize a municipality or a special taxing district created by the State with annual revenues of less than $250,000 in the prior 4 fiscal years to have an audit conducted once every 4 years. Notwithstanding paragraph (1) of this subsection and except as provided in subsection (e) of this section, a municipality is exempt from the audit requirements of subsection (a) of this section for any fiscal year in which the municipal annual revenues are less than $100,000. The audit required under subsection (a) of this section shall be conducted by a certified public accountant: acting in the capacity of an independent auditor or an official auditor of a county or municipality; and who is in compliance with the Maryland Public Accountancy Act. An official auditor must be approved by the Legislative Auditor to conduct the audit. In conducting the audit, the auditor shall examine the methods, accuracy, and legality of the financial records of the county, municipality, or special taxing district. On the initiative of the Legislative Auditor, the Legislative Auditor may review or audit the financial records of any county, municipality, or special taxing district created by the State. A county, municipality, or special taxing district created by the State may request the Legislative Auditor to audit its financial records. An audit exemption for a municipality under subsection (b)(2) of this section does not affect the requirement of that municipality to file with the Department of Legislative Services a financial report in accordance with § 16–304 of this subtitle. If the financial report submitted in accordance with § 16–304 of this subtitle by a municipality that has an audit exemption under subsection (b)(2) of this section indicates a financial or accounting irregularity or concern, the Joint Audit and Evaluation Committee may request or require the municipality to conduct a review or audit of its financial records consistent with the requirements of subsection (c) of this section.

The county, municipality, or special taxing district shall report the results of the audit required under § 16–305 of this subtitle to the Legislative Auditor: on the form and in the manner that the Legislative Auditor requires; and on or before the date the financial report of the county, municipality, or special taxing district must be filed under § 16–304(a) of this subtitle. An audit report filed by a county, municipality, or special taxing district with the Legislative Auditor shall include financial statements of the county, municipality, or special taxing district that are: prepared in accordance with generally accepted accounting principles; and audited in accordance with generally accepted auditing standards. An audit report filed with the Legislative Auditor is a public record. Except as provided in subsection (e) of this section, if a county, municipality, or special taxing district does not comply with subsection (a) or (b) of this section, the Comptroller, on notice from the Executive Director of the Department of Legislative Services, may order the discontinuance of all money, grants, or State aid that the county, municipality, or special taxing district is entitled to receive under State law that are distributed by the Comptroller, the clerks of the court, or any other unit of State government. Subject to paragraph (2) of this subsection, if a county, municipality, or special taxing district does not comply with subsection (a) or (b) of this section within 2 calendar years after the deadline described in subsection (a)(2) of this section, the Executive Director of the Department of Legislative Services shall notify the Comptroller and the Comptroller shall order the discontinuance of 20% of all State aid for the current fiscal year for highway user revenues and disparity grants that the county, municipality, or special taxing district is otherwise entitled to receive under State law that is distributed by the Comptroller, the clerks of the court, or any other unit of State government. A discontinuance of funds under paragraph (1) of this subsection shall remain in effect for a county, municipality, or special taxing district until the county, municipality, or special taxing district submits the audit report required under this section. Subject to subsubparagraph 2 of this subparagraph, the Executive Director of the Department of Legislative Services shall notify the Comptroller and the Comptroller shall order the reinstatement of the funds discontinued under paragraph (1) of this subsection promptly after the county, municipality, or special taxing district submits the audit report required under this section. If a reinstatement of funds is ordered under subsubparagraph 1 of this subparagraph, only the discontinued funds for the current fiscal year shall be released. If a county, municipality, or special taxing district failed to submit the audit report required under this section in the same fiscal year in which it was due, the discontinued funds for that fiscal year shall revert to the General Fund of the State for discontinued disparity grants and to the Transportation Trust Fund for discontinued highway user revenues.

Each year the Legislative Auditor shall: review the audit reports required under § 16–306 of this subtitle; and make a full and detailed written report to the Comptroller and, in accordance with § 2–1257 of the State Government Article, the Executive Director of the Department of Legislative Services on the result of the audit of the financial records of each county, municipality, and special taxing district created by the State. The report may include recommendations that the Legislative Auditor considers advisable relating to: methods of bookkeeping; changes in the uniform system of financial reporting; and changes in the reports of the counties, municipalities, and special taxing districts. In conducting the review required under subsection (a) of this section, the Legislative Auditor may review the work papers and other documentation of the auditor who filed the audit report. The Legislative Auditor may refer audit reports, work papers, or other documentation reviewed by the Legislative Auditor to the State Board of Public Accountancy for action required by the Maryland Public Accountancy Act. The Legislative Auditor shall report any violation of this subtitle by a county, municipality, or special taxing district created by the State to the Comptroller and, in accordance with § 2–1257 of the State Government Article, to the Executive Director of the Department of Legislative Services.

Each county shall adopt uniform rules and regulations for the auditing of the financial records of each special taxing district created by the county that: receives money collected by the county from a county property tax imposed at the request of the special taxing district; has annual expenditures exceeding $250,000; and has money disbursed and expended independently of the county government. At a minimum, the rules and regulations required under subsection (a) of this section shall require the audit to: be conducted by: a certified public accountant: acting in the capacity of an independent auditor or an official auditor of the county; and who is in compliance with the Maryland Public Accountancy Act; or an auditing committee approved by the official auditor of the county; determine if tax funds have been received, deposited, and disbursed in accordance with approved appropriations and State and local law; include the following financial statements: a balance sheet; a statement of revenues; a statement of expenditures and encumbrances; and a statement of changes in fund balance; and be completed and filed with the appropriate county officials not later than 90 days after the close of the fiscal year. For a special taxing district that is created by the county and has annual expenditures of less than $250,000, the county shall require: an annual financial report; and an audit every 4 years unless the county determines, on a case–by–case basis, that more frequent audits are required. If a special taxing district subject to subsection (a) or (c) of this section does not file a financial report or audit report required by the county, the county may withhold the distribution of taxes imposed on behalf of the special taxing district until the report is received. When a county files its audit report with the Legislative Auditor as required by § 16–306 of this subtitle, the county also shall submit: a copy of each financial report and audit report received from each special taxing district subject to subsection (a) or (c) of this section; and a report on the results of the county’s review of each special taxing district’s compliance with this section. The Legislative Auditor shall: review the financial reports, audit reports, and other information received from each county; and submit recommendations as appropriate based on the results of the review.

If the Legislative Auditor audits the financial records of a county, municipality, or special taxing district as provided in this subtitle, the county, municipality, or special taxing district shall pay the costs of the audit. As soon as practical after completing an audit, the Legislative Auditor shall certify the total costs of the audit to the appropriate official of the county, municipality, or special taxing district. On receipt of the certification of costs, the official of the county, municipality, or special taxing district shall pay the Comptroller.