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Is
an annual audit required by law?
Yes. AS
29.35.120 states that municipalities must have an annual
audit performed and second class cities must provide "an
audit or statement of annual income and expenditures"
(usually referred to as a certified financial statement).
Also, state
and federal law require that an entity provide an audit if
it spends
a certain amount in federal or state money. The details of this requirement
should be spelled out in the agreement awarding the money.
(Check with the
State Audit Coordinator at 907-465-4666 to verify the amount.)
An audit must comply
with the standards set out in the Single Audit Act and meet
the requirements of The U.S. Office of Management and Budget
OMB
Circular A-133.
If a community
gets an audit that complies with the state or federal audit
grant or program audit requirements, it is not required to
then have a second audit or certified financial statement
prepared under state statute. The single audit standards satisfy
the state audit requirements for municipalities under AS
29.35.120. An audit or certified financial statement (discussed
below) is required before a municipality can receive state
revenue sharing funds. Local ordinances may have additional
audit requirements and procedures.
NOTE: "Spend,"
as used here, doesn't include advances or payment for anything
outside of the fiscal year in question.
If federal
funds are passed through a state agency, are they still considered
federal funds for audit purposes?
Yes, federal
funds remain federal even if they are passed through a state
agency.
Who should
perform an annual audit?
AS
29.35.120 requires that an audit be performed by a certified
public accountant (CPA) who has no personal interest either
directly or indirectly in the financial affairs of the municipality.
In addition to these legal requirements, Government
Auditing Standards referenced in 2 AAC 45.010 [The
Alaska Administrative Code] requires that the CPA have specific training
in governmental accounting and auditing standards. Also, 2
AAC 45.060 states that OMB can only accept state single audits
from audit organizations that have submitted a current quality
control review report.
What is the
difference between a single audit and a program audit?
A single audit
is an audit of the whole organization and all state and/or
federal programs. A program audit is an audit of just the
grant or program for which funds are received. Program audits
are only allowable under certain conditions. See OMB
Circular A-133 for federal programs and 2 AAC 45.010(g)
for state programs.
How much
does an audit cost?
The cost of
the audit will depend on whether the audit is a financial
single or program audit, the level of detail, the complexity
of the entity's financial records, how well organized the
financial records and supporting documents are, and the time
it takes to complete the audit. Contact at least three auditing
firms to get a cost estimate. Generally, audits range anywhere
from $5,000 to $15,000, but they can cost more or less.
How do we
prepare for an audit?
The governing
body must budget for its audit. Keeping clear, accurate, and
up-to-date records and background documentation in an organized
fashion can help keep audit costs down, as the auditor isn't
spending time trying to locate documentation or figure out
the organization's record keeping system. The auditor should
provide a list of what information is required to prepare for the
audit.
Who needs
to see the audit?
All records
of a public entity that are not expressly confidential are
open to the public. The audit is no exception. AS
29.35.120 says that copies of an audit shall be available
to the public upon request. The municipality may charge for
copies given to the public, but it may only charge what it
costs to produce the copy. The Alaska Office of Management
and Budget (OMB) is the state's single audit "Coordinating
Agency," and receives copies of any audits required.
A Federal Single Audit along with the SF-SAC
Form is required to be submitted to the Federal Audit
Clearinghouse. In addition to the public, State and federal
agencies may want to review a municipality's audit before
issuing grants, revenue sharing, or other public funds.
What does
an audit provide?
An audit provides
an analysis of the organization's financial status and its
fiscal records. The audit states what has been audited and
whether the organization's financial information is presented
fairly. Depending on the type of audit, an opinion on internal
controls and compliance with laws and regulations may be provided.
A report of the auditor's comments and recommendations might
also be provided. If the audit is a state or federally mandated
single or program audit, the audit will include a report on
whether the organization has complied with the rules and regulations
associated with the major state or federal funding program(s).
What is a
certified financial statement and why is it important?
A certified
financial statement is a report of revenues and expenditures
for a given period, accompanied by a resolution of the governing
body verifying that the information in the statement is true
and correct. Second class cities in Alaska may submit a certified
financial statement instead of an audit for state revenue
sharing purposes. Every year, the Department of Community
and Economic Development (Commerce) publishes municipal Certified
Financial Statement forms,
with instructions for completing a certified financial statement.
If a municipality fails to provide either an audit or certified
financial statement, the municipality is not eligible for
state revenue sharing funds for that fiscal year.
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