Chapter 07. Annual Audits of Financial Statements and Federal Awards

In these regulations, the following terms have the meanings indicated.

Terms Defined.

In this chapter, the following documents are incorporated by reference.

Documents Incorporated.

Audit Required. Each local board shall have an audit made of its financial statements for each fiscal year in accordance with this regulation.

Qualifications of Auditor. An independent certified public accountant, or a partnership or corporation of certified public accountants who hold a license or permit issued by the State Board of Public Accountancy shall perform the audit.

Approval by State Superintendent of Schools. The local superintendent of schools shall submit to the State Superintendent of Schools for approval, by May 1 of the fiscal year to be audited, the name of the auditor.

Standards. The auditor shall conduct the audit in accordance with generally accepted auditing standards and the requirements set forth in the following documents:

Report on Audit of Financial Statements. The audit reporting package shall include, at a minimum:

Submission of Report. The local superintendent of schools shall submit a copy of the audit reporting package required under §E of this regulation to the State Superintendent of Schools and the appropriate local authority by September 30 after the close of the fiscal year.

Reconciliation. If there are any differences between the audited financial statements and the annual school financial report submitted pursuant to COMAR 13A.02.01.02D, the local superintendent of schools shall submit a report reconciling the differences to the State Superintendent of Schools by December 31 after the close of the fiscal year.

Additional Audit Requirements and Standards. In addition to the requirements of Regulation .04 of this chapter, if a local board expends $500,000 or more in a fiscal year in federal awards, the local board shall have an audit made in accordance with the Single Audit Act of 1984 and the Single Audit Act Amendments of 1996 and the Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.

Submission of Report. The local superintendent of schools shall submit a copy of the audit reporting package required under §A of this regulation and responses to the findings noted therein to the State Superintendent of Schools and to the federally designated central clearinghouse within 30 days after receipt of the audit report, but not later than December 31 after the end of the fiscal year.

Costs. Additional costs incurred by a local board in meeting the requirements of this regulation may be charged to federal awards as a direct expenditure provided that all standards are met. The percentage of costs charged to federal awards for this purpose may not exceed the percentage that federal funds expended represent of total funds expended by the local board during the fiscal year. The percentage may be exceeded if the costs are the subject of a separate and distinct billing supported with appropriate documentation that demonstrates higher actual costs. The cost of an audit of expenditures of federal awards of less than $500,000 in a fiscal year may not be charged to federal awards.

Auditor Selection. If federal funds are used to pay for any of the costs of an audit, the local board shall follow the procurement standards prescribed by 34 CFR Part 74, Subpart P, “Procurement Standards”, and shall give small audit firms and audit firms owned and controlled by socially and economically disadvantaged individuals the maximum practicable opportunity to participate in contracts awarded.

Department Responsibilities. The Department shall review all audits of the local boards made pursuant to Regulations .04 and .05 this chapter, monitor the implementation of corrective action, and determine the amount of questioned costs to be disallowed.

Written Notice of Disallowed Costs. The Department shall give the local superintendent of schools written notice whenever it determines that any questioned costs are to be disallowed.

If the auditor becomes aware of any fraudulent acts, the auditor shall promptly notify the local superintendent of schools and prepare a separate written report.

The local superintendent of schools shall promptly notify the Department of the fraudulent acts and any actions taken or proposed.

Fraudulent acts include:

Audit reports shall be made available by the local superintendent of schools for public inspection within 30 days after receipt of the audit report.

Audit reports and working papers shall be retained for 5 years unless the Department or appropriate federal agency notifies the local superintendent of schools in writing to retain the records for a longer period.

Audit working papers shall be made available upon request to the Department or an appropriate federal agency.

The State Superintendent of Schools may extend the time periods in Regulations .04C and G and .05B of this chapter upon written request by the local superintendent of schools.

A written request for extension of a time period shall be made at least 15 days before an act is required or report is due and shall state the reasons for requesting the extension.