AN ACT CONCERNING CONNECTICUT STATE SINGLE AUDIT REVISIONS.

By law, municipalities and other nonstate entities that receive substantial amounts of state funding must undergo a single audit. This bill defines a “single audit” as an audit that covers an entity's financial statements and state financial assistance. It increases, from $ 100,000 to $ 300,000, the amount of fiscal assistance a nonstate entity can receive from the state before it becomes subject to the state single audit law. It increases, from $ 200,000 to $ 1 million, the total amount of annual revenue certain entities must have before they become subject to the law. It modifies what constitutes a political subdivision for this purpose to include all types of special districts, rather than just fire districts, fire and sewer districts, and municipal utilities. By law, political subdivisions also include such entities as the Metropolitan District Commission, regional school boards, regional planning agencies, and tourism districts.

Current law allows a nonstate entity to choose to have a program specific audit instead of a single audit if all of the state financial assistance that it expended in the audit year was for a single program. The bill specifies that this option is not available if a grant agreement or state or regulatory provision governing the state financial assistance program requires a financial statement audit.

The bill gives auditors and the Office of Policy and Management (OPM) greater discretion in determining which programs to audit. It requires the OPM secretary periodically to issue a state single audit compliance supplement containing information to help independent auditors conduct state single audits. This information must at least identify state financial assistance programs and their significant compliance requirements and include suggested audit procedures for determining compliance, programs that are exempt from auditing requirements, and information relevant to the risk-based approach for use in determining major state programs that are subject to auditing requirements.

In addition to provisions that apply to all state programs, the law has a number of provisions that apply to major state programs. For example, the auditor must perform procedures to obtain an understanding of internal controls sufficient to plan the audit and the testing of internal controls to support a low assessed level of control risk for such programs.

Current law defines “major state program” as any non-exempt program for which total expenditures of state financial assistance by a nonstate entity during the applicable year exceeds the larger of (1) $ 100,000 or (2) 1% of the total amount of state financial assistance expended, excluding expenditures of an exempt program by the nonstate entity during the audited year. The bill instead allows the auditor to use a risk-based approach to determine which programs are major. The auditor's determination must include (1) factors consistent with requirements established by the U. S. Office of Management and Budget and (2) current and prior audit experience, oversight by state agencies and pass-through entities, and the risk inherent in state programs. (An example of a pass-through entity is a grantee who passes state funding on to a sub-grantee. )

Current law defines “exempt programs” as education cost sharing and various other educational grant programs. The bill instead allows the OPM secretary to designate programs as exempt after consulting with the Auditors of Public Accounts and the commissioner of the state agency that awarded the state financial assistance.

By law, if a nonstate entity subject to the auditing requirements fails to designate an auditor to conduct its audit, the cognizant agency must do so. The bill makes the nonstate entity responsible for paying the costs of any audit conducted by an auditor a cognizant agency designates.

By law, the cognizant agency may extend, by up to 30 days, the deadline for a nonstate entity to file copies of its audit with the relevant state agencies if the auditor making the audit and the entity's chief executive officer submit a joint request to the cognizant agency stating the reasons for the extension. The bill additionally requires that the request include an estimate of the time needed to complete the audit. It requires the auditor or chief executive officer to promptly provide any additional information the cognizant agency requires. Current law allows the cognizant agency to hold a hearing on the request. The bill instead allows the agency to require the auditor and officials of the nonstate entity to meet with its representatives.

By law, the audit must determine whether a nonstate entity has complied with the laws, regulations, and grant provisions of major state programs, and the auditor must select and test a representative number of transactions from each such program. The bill specifies that the auditor must do this to provide him or her with sufficient evidence of compliance.

By law, when the total expenditures of a nonstate entity's major state programs are less than 50% of its total expenditures of state financial assistance, excluding exempt program expenditures, the auditor must select and test additional programs to cover at least 50% of this total. The bill eliminates, in such cases, requirements that (1) the selection be carried out in accordance with relevant OPM regulations and (2) no more than two programs which each has total state financial assistance expenditures between $ 25,000 and $ 100,000 be tested if needed to achieve the audit coverage.

Yea

Nay

(03/13/2009)