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Audit requirements

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1. What is the federal award threshold that would require a school district to have a single audit? 

Districts that expend $750,000 or more in federal awards are subject to the annual single audit requirements, which would require a district to obtain an audit of its financial statements and federal programs. 

2. Is a school district that is not required to have a single audit required to obtain an audit?

Yes. A school district that has an adopted expenditure budget of $2 million or more for the Maintenance and Operation (M&O) Fund is required to contract for an annual financial statement audit. A school district that has an adopted expenditure budget of less than $2 million but more than $700,000 for the M&O Fund is required to contract for a biennial financial statement audit (e.g., an audit of 2 fiscal years performed after the 2nd year). Districts that are required to have an annual audit may choose to contract for a biennial audit if the district’s previous year’s audit did not contain significant negative findings. Biennial audits require a compliance questionnaire to be completed only for the later year. See USFR §VIII, Audit Requirements, for specific requirements.

School districts that have an adopted expenditure budget of $700,000 or less for the M&O Fund are subject to a procedural review performed at our Office's discretion.

3. When are school district audits due and what are their submission requirements?

Based on the district’s audit contract, the district should submit the audit reports and USFR Compliance Questionnaire (CQ) to the entities as described below within 9 months after their fiscal year-end, (March 31). (For FY 2021 audits, see FAQ #10 below.) See USFR §VIII, Audit Requirements, and sample request for proposals and contract for additional information. Districts should coordinate with their auditors, as needed, to submit their audited financial statements to our Office as soon as they are completed, separate from the single audit reports and USFR CQ if those reports are not issued together. 

Items to submitSubmit toHow to submit
Audit reports (Single Audit Reporting Package or Financial Statements) and USFR CQArizona Auditor General

District auditors submit audit reports via ShareFile and USFR CQ via web-based system

 Arizona Department of Education
 

District submits to ADE for posting on ADE’s website

Contact ADE at (602) 542-3901 with any questions
 County School Superintendent's (CSS) Office

Coordinate with your CSS to provide a paper or electronic copy

Single Audit Reporting Package and data collection formFederal Audit Clearinghouse
 		Federal Audit Clearinghouse website

 

 

 

4. What action must school district governing boards take to publicly accept their audits?

Based on A.R.S. §15-914, as amended by Laws 2021, Ch 7, §3, school district governing boards must publicly accept all audits and compliance questionnaires by roll call vote. District management should provide board members access to audit reports and the USFR compliance questionnaire as part of submitting the district’s audit for board acceptance. Board members may find the videos included in FAQ #6 below or the information included in our Financial Report Users Guide—State and Local Governments and Internal Control and Compliance Reports User Guide helpful in understanding the important and useful information presented in district financial reports.

5. What actions should school districts take when they receive their audit reporting package?

Each year that the district receives a financial audit, district management should take the actions listed below to address any findings noted in the audit, including the USFR compliance questionnaire findings. Districts should focus their corrective actions first on any specific, significant areas noted in any correspondence from our Office. Districts that receive a noncompliance letter from our Office are required to submit the corrective action plan described below to our Office as part of the follow-up process.

  • Review the audit reports and USFR compliance questionnaire to note any deficiencies.
  • Identify the requirements that were not met that resulted in the deficiencies.
  • Discuss possible corrective actions with the district’s auditor or our Office if there are questions on how to correct a deficiency.
  • Develop and implement a corrective action plan that includes:
    • Reviewing and educating employees on the guidance in the USFR, FAQs, webinars, etc. related to the deficiency.
    • Specific corrective actions broken into steps and assigned to individuals.
    • Names of the individuals responsible for taking those actions.
    • Specific procedures that will be used to verify corrections have been made.
    • Names of the individuals who will verify the corrective actions taken by others.
    • Timeline for correction and verification to be completed.

Video—Click here to access a video designed to help districts address audit deficiencies and prepare an effective corrective action plan.

Template—Click here to access a corrective action plan template in Microsoft Excel that districts may use as a starting point for developing a corrective action plan. 

6. What tools are available to help school districts understand their financial reports? ​ ​

We have developed the following two videos to help decision-makers, such as district management and governing board members, identify and understand the important and useful information contained in school district financial reports. Understanding this information is useful when reviewing a school district’s financial performance and evaluating financial decisions. Our videos briefly describe key financial information contained within financial reports and highlights where to find this information.

Understanding School Districts Financial Statements

This video can help decision-makers identify and understand the important and useful information presented in school district financial reports.

Understanding School District Internal Control and Compliance Reports

This video can help decision-makers identify and understand the significant information presented in school district internal control and compliance reports.

7. Must audit contracts and contract amendments be submitted to our Office for approval?

Yes. In accordance with Arizona Revised Statutes (A.R.S.) §§15-914(E) and 41-1279.21(A)(4), our Office must review and approve all proposed audit contracts and contract amendments before the district signs the contract and the audit firm begins any audit work, including contracts for financial audits where the district subsequently expends $750,000 or more in federal awards and must amend the contract to receive a single audit. Our Office prefers that proposed audit contracts be submitted by email to asd@azauditor.gov.

8. What action is required for school districts that exercise an option to renew for an existing audit contract?

If a district chooses to exercise a renewal option in an existing contract, the district should notify the audit firm that the district will be renewing the audit contract. The renewal should be made by written notification (letter or email) addressed to the audit firm and include the type of audit to be performed, the year(s) being renewed, and the price(s) as stated in the audit firm's original proposal. A copy of the renewal notification must be submitted to our Office before any audit work begins. 

If a district has multiyear contract, without an option-to-renew provision, that our Office has already approved, no additional action is needed.

9. Is a school district required to select an audit firm to perform its annual/biennial audit from a list approved by our Office? ​

No. To help districts find an audit firm to perform their annual/biennial audit, our Office will provide, upon request, a list of audit firms who currently have approved audit contracts or are interested in contracting for audit services with school districts. We do not recommend, endorse, or vouch for any audit firms on the list, and the list does not qualify as a prospective bidders' list. Districts may use one of these firms or may select a different firm. When districts submit a proposed audit contract to our Office for approval, we determine whether the audit contract states that the auditor is independent as required by statute. We do not give any assurance that the work performed by the audit firm or the final audit reports will comply with applicable laws and professional standards. However, if we have previously reviewed the work of the audit firm and found that it consistently failed to comply with applicable laws and professional standards, we may disapprove the audit contract. The district must then contract with another audit firm to perform the audit. 

10. Is there an extension for filing FY 2021 audits due to the delay in federal compliance information needed to audit the use of COVID-19 related grants?

Yes, for FY 2021 audits, the federal Office of Management and Budget (OMB) extended the single audit due date by 6 months to September 30, 2022. OMB advised entities using that extension to document the reason for any delayed audit filing. We are applying the same extension for all FY 2021 school district financial audits and USFR CQs. Districts are not required to obtain individual approval to use this extension but should document and notify us of the reasons for any delayed audit filing by March 31, 2022. We encourage districts to work with their auditors to complete their FY 2021 audits as soon as possible to provide stakeholders relevant and timely financial information.