Information For Municipalities and School Districts
Information for Fire Districts
Quasi-Public Entity Audit Bid Specifications and Procedures
Information for Municipalities and School Districts
TABLE OF CONTENTS
Annual Post Audit
- Legal Requirements
- Procedure for Requesting Approval of RFP for Audit Services and Auditor Selection
Filing Annual Audit Reports
School Uniform Chart of Accounts (UCOA) – Agreed-Upon Procedures
Corrective Action Plan To Address Audit Issues
- Independent Auditors Opinion on Financial Statements
- Independent Auditors Findings and Recommendations
Developing A Plan To Reduce An Accumulated Deficit
- Legal Requirements
- Monthly Monitoring of Financial Operations
- Corrective Action Plan
- Year-end Deficits
Developing A Plan To Fund Annual Pension Costs
Requesting Certification To Exceed The Statutory Tax Limit Due To An Emergency Situation
Ministerial Approval of Bonds
Rhode Island School Districts
Local
Regional
- School Deficits (16-3-11)
- Appropriation Deficiencies (16-2-21.4)
Rhode Island General Law Section 45-10-4 requires:
- Municipalities and regional school district to engage an independent certified public accountant to make a detailed post audit of their financial records. School districts which are part of the primary government of a municipality shall be included in the municipality's post audit and shall not be required to obtain a separate post audit;
- Annual audits of municipalities and school districts, to be conducted in accordance with generally accepted auditing standards and government auditing standards;
- Selection of auditors to be subject to final written approval by the State Auditor General. Municipalities and school districts shall not engage auditors nor contract for their services until such written authorization is received by the Auditor General;
- The term school district shall include regional school districts.
Refer to section on School Uniform Chart of Accounts (UCOA) – Agreed-Upon Procedures for additional annual reporting requirements related to school districts.
Procedure for Requesting Approval of RFP for Audit Services and Auditor Selection
In order to assist municipalities going through the auditor selection process this office has issued Guidelines for Audit Bids and Specifications for municipalities. These guidelines contain information that should be included in a request for proposal of audit services, as well as the forms necessary to obtain approval of:
- the request for proposal prior to its issuance (Appendix 1); and
- the proposed selection of auditor prior to engaging or entering into a contract for services (Appendix 2) and (Appendix 3).
As part of the approval of a municipality’s or regional school district’s selection of an independent auditor, the Auditor General will consider several factors, including but not limited to the following:
- the municipality’s or regional school district’s basis for selecting an audit firm;
- the audit firm’s qualifications and responses relative to the RFP;
- the audit firm’s capacity and track record for meeting required deadlines (e.g. staffing levels and other government engagements with similar due dates); and
- the audit firm’s cost proposal for the engagement relative to the other proposals.
By approving the municipality’s or regional school district’s selection of an audit firm, the Auditor General is not ensuring that the audit firm will (1) meet all contractual terms including the municipality’s or regional school district’s deadline for completion of the audit or (2) comply with professional standards in the conduct of the audit.
Approval of a firm to conduct the audit does not limit our authority to review, make further inquiries, and/or reject the audit report.
Rhode Island General Law Section 45-10-5 requires Rhode Island municipalities and regional school districts to file their annual audit reports with the Auditor General and the state Director of Revenue no later than six months after the close of the fiscal year. This includes any findings and recommendations made as a result of the audit. General Law Section 45-10-5.2 and 45-10-5.3 provide for sanctions for communities that fail to comply with this requirement.
Refer to section on School Uniform Chart of Accounts (UCOA) – Agreed-Upon Procedures for additional annual reporting requirements related to school districts.
Procedures for Requesting an Extension of Time
Municipalities and regional school districts are required to submit their audited financial statements by the deadline stated in the general laws. However, if significant circumstances prevent compliance, the municipality or regional school district must follow the procedures described below to request an extension.
Rhode Island General Law Section 45-10-5 provides that the Auditor General may, in his discretion, grant extensions in the filing of the audit report only upon reasonable cause for such extension being demonstrated by the municipality or regional school district. The procedures for petitioning this office for extensions beyond the legal deadline are as follows:
- For municipalities and regional school districts needing less than 30 additional days to submit their audited financial statements:
At least 15 days prior to the legal deadline for submission of reports, the chief finance officer must notify the Auditor General of the need for an extension and submit a written application with the Auditor General to request an extension of time to file the annual audit. The request shall be prepared in conjunction with the auditor and shall be signed by the chief executive officer, the chief finance officer, and the auditor.
To the extent known, the application should indicate the following:
- The anticipated date the audit will be completed and submitted to the Auditor General’s Office.
- A detailed description of the reasons why the audit will not be completed by the legal deadline and a listing of all items pending completion, the responsible party (i.e., City/Town, School Department, Auditors, Actuary), and an estimated completion date for each item.
- The anticipated date the audit will be completed and submitted to the Auditor General’s Office.
- For municipalities and regional school districts anticipating needing more than 30 additional days to submit their audited financial statements:
At least 45 days prior to the legal deadline for submission of reports, the chief finance officer must notify the Auditor General of the need for an extension and submit a written application with the Auditor General to request an extension of time to file the annual audit. The request shall be prepared in conjunction with the auditor and shall be signed by the chief executive officer, the chief finance officer, and the auditor.
To the extent known, the application should indicate the following:
- The anticipated date the audit will be completed and submitted to the Auditor General’s Office.
- A detailed description of the reasons why the audit will not be completed by the legal deadline and a listing of all items pending completion, the responsible party (i.e., City/Town, School Department, Auditors, Actuary) and an estimated completion date for each item.
- A list of any other situations that are causing the delay shall also be described and a timetable for when each one will be resolved or completed in order to meet the above-stated completion date.
Municipalities and regional school districts that comply with the above extension requirements will immediately begin monthly meetings with the Auditor General’s office to ensure that the revised completion schedule is being adhered to. Once a completion date can be reasonably determined, the Auditor General will approve an extension to the completion date.
Corrective actions will be requested by the Auditor General after submission of the audited financial statements to ensure that the reasons for the late submission are addressed in a timely manner.
Municipalities and regional school districts that comply with the above extension requirements will receive an automatic 30-day extension (acknowledged by email). No further extensions will be awarded beyond this initial 30-day extension.
Corrective actions will be requested by the Auditor General after submission of the audited financial statements when deemed appropriate due to the reasons for the late submission.
The General Laws require timely submission of municipal audit reports so that information on fiscal accountability will be available to users of financial statements soon enough to be meaningful and useful. In addition, municipal and school audit reports are used by various state agencies to extract information that is needed within a certain time frame. As part of the annual audit, municipalities and school districts are also required to report certain financial data, which is reconciled to the audited financial statements, to the Division of Municipal Finance. The audit reports and the additional reported financial data, as well as, various analyses and comparisons between municipalities and school districts are posted on the Municipal Transparency Portal website.
SCHOOL UNIFORM CHART OF ACCOUNTS (UCOA) – AGREED-UPON PROCEDURES
Rhode Island General Law Section 16-2-9.4 required the Office of the Auditor General and the Rhode Island Department of Elementary and Secondary Education to promulgate a uniform system of accounting, including a chart of accounts based on the recommendations of the Advisory Council on School Finance.
All accounts of the municipal school districts, regional school districts, state schools, collaboratives and charter schools are required to be kept in accordance with the uniform system of accounting; provided, that in any case in which the uniform system of accounting is not practicable, the Office of Auditor General, in conjunction with the Rhode Island Department of Elementary and Secondary Education, shall determine the manner in which the accounts shall be kept.
Each school district, state school, collaborative, or charter school, which is required to adopt the Uniform Chart of Accounts (UCOA), shall have additional compliance testing procedures designed to assess compliance with UCOA requirements and the entity’s effectiveness of internal control over compliance with those requirements. The auditors engaged to perform the annual audit of the entity shall also be engaged to report on their tests of compliance with UCOA requirements in an agreed-upon procedures compliance attestation format.
The Office of the Auditor General and the RI Department of Education have worked cooperatively to develop the following agreed-upon procedures to test compliance with UCOA requirements:
Effective for fiscal 2023 engagements:
UCOA Compliance Testing Requirements 2023.pdf
UCOA Compliance Testing Requirements 2023.docx
UCOA Reconciliation Template.xlsx
Effective for fiscal 2022 engagements:
UCOA Compliance Testing Requirements 2022.pdf
UCOA Compliance Testing Requirements 2022.docx
UCOA Reconciliation Template.xlsx
Effective for fiscal 2021 engagements:
UCOA Compliance Testing Requirements 2021.pdf
UCOA Compliance Testing Requirements 2021.docx
UCOA Reconciliation Template.xlsx
Contact the Office of the Auditor General for UCOA Compliance Testing Requirements for fiscal years prior to 2020.
The most recent compliance testing requirements document above should be included in the entity’s request for proposals for audit services and agreed-upon procedures engagements.
Auditors should have performed the test work necessary to complete the UCOA agreed-upon procedures before issuing the audited financial statements. For school entities with a June 30 fiscal year end, the agreed-upon procedures report and the audited financial statements shall be provided to the Rhode Island Department of Elementary and Secondary Education and the Office of the Auditor General at the conclusion of the annual audit – i.e., December 31 unless an extension has been granted.
For school entities which have adopted a fiscal year end other than June 30, the agreed-upon procedures report shall be provided by December 31 for the activity related to the year ended on the preceding June 30.
The Auditor General has provided additional guidance on filing the AUP reports – refer to December 2023 Auditor General Communication – UCOA file and AUP.
For additional information on UCOA, please follow the below link to the Rhode Island Department of Elementary and Secondary Education’s website: RIDE's Uniform Chart of Accounts
CORRECTIVE ACTION PLAN TO ADDRESS AUDIT ISSUES
Independent Auditors Opinion on Financial Statements
Rhode Island General Law 45-10-6.1 requires that if an auditor conducting the post audit of a municipality or regional school district expresses a modified opinion on the financial statements (i.e., qualified, adverse, or disclaimer of opinion), the chief finance officer shall:
- prepare a detailed corrective action plan and timetable which addresses the issue(s) which caused the auditor to issue a modification to the opinion on the financial statements; and
- submit the plan to the city or town council, state Auditor General, and state Director of Revenue, within 45 days of receipt of the audited financial report.
Independent Auditors Findings and Recommendations
Rhode Island General Law 45-10-6.1 also requires that:
- all findings and recommendations reported by the auditors, including those reported in a separate letter, be submitted to the state Auditor General and state Director of Revenue;
- the chief finance officer of the municipality shall:
- prepare a corrective action plan and timetable for all findings and recommendations; and
- submit the plan to the city or town council, state Auditor General, and state Director of Revenue, within 45 days of receipt of a written report or letter of findings and recommendations from the auditors.
- All management letters shall be public records.
DEVELOPING A PLAN TO REDUCE AN ACCUMULATED DEFICIT
Section 45-12-22 of the Rhode Island General Laws entitled "Indebtedness of Towns and Cities" was amended June 27, 2003 by adding the following sections:
- 45-12-22.1 Municipal Deficits - Purpose
- 45-12-22.2 Monitoring of Financial Operations - Corrective Action
- 45-12-22.3 Year-End Deficits
- 45-12-22.4 Deficit Financing - Approval Required
- 45-12-22.5 Unbudgeted Expenditures
- 45-12-22.6 Cooperation of School Committee
- 45-12-22.7 Enforcement and Remedies
The purpose of this law is to ensure that municipalities and school districts monitor financial operations on an ongoing basis, execute a rapid response to budget problems and maintain a balanced budget. The following is a summary of certain provisions of this law. To view all provisions, please click the legal references outlined above.
Monthly Monitoring of Financial Operations
Rhode Island General Law 45-12-22.2 requires that:
- The chief financial officer of each municipality and each school district shall summit a report, certifying the status of the municipal budget including the school department or regional school district's budget, on a monthly basis.
- This monthly report shall be submitted to the municipality's chief executive officer, each member of the city or town council, and the school district committee.
- The chief financial officer of the municipality shall also submit a report quarterly to the state office of municipal affairs certifying the status of the municipal budget.
Elements of the Reports:
- The reports shall be in a format prescribed by the state Division of Municipal Finance and the State Auditor General. A copy of this form can be obtained from the Division of Municipal Finance web page (https://municipalfinance.ri.gov/resources/forms)
- The reports shall include the financial operations of any department or fund of municipal government including the school department or regional school district, notwithstanding the status of the entity as a separate legal body.
- The reports shall contain a statement as to whether any actual or projected shortfalls in budget line items are expected to result in a year-end deficit, the projected impact on year-end financial results including all accruals and encumbrances, and how the municipality and school district plans to address any such shortfalls.
If any reports required under this section project a year-end deficit the chief financial officer of the municipality shall submit to the state office of Municipal Affairs the monthly budget analysis report and a corrective action plan no later than thirty (30) days after completion of the monthly budget analysis (monthly reports).
Elements of the Plan:
- It shall provide for avoidance of a year end deficit;
- It may include recommendations as to whether an increase in property taxes and/or spending cuts should be adopted to eliminate the deficit.
- It shall include a legal opinion by municipal counsel that the proposed actions under the plan are permissible under federal, state and local law.
Rhode Island General Laws Section 45-12-22.3 provides that if at the end of the fiscal year, the chief financial official determines, based on available data, that it is likely that the city or town's general fund or combined general fund and unrestricted school special revenue fund will incur a deficit, the municipality must immediately develop a plan to eliminate the deficit.
Elements of the Plan
The plan must, at a minimum, comply with the following provisions in the law:
- Provide sufficient funds by annual appropriation to eliminate the entire deficit in a period not to exceed five years.
- Provide annual appropriations for deficit reduction in equal or diminishing amounts during the five (5) year period.
- Indicate the necessary governmental approvals and procedures required to implement the plan.
- Include a legal opinion by municipal counsel that the proposed actions are permissible under federal, state, and local law.
- Submit the plan to the Auditor General for approval before it is implemented.
The Auditor General shall determine whether the plan reasonably insures elimination of the accumulated deficit in accordance with the law in a fiscally responsible manner. The judgment of the Auditor General in applying this standard shall be conclusive.
DEVELOPING A PLAN TO FUND ANNUAL PENSION COSTS
Rhode Island General Laws Section 45-10-15 requires the following:
- For any audit year in which a municipality contributes materially less than 100% of the annual required contribution to its pension plan(s) as reported in accordance with GASB Statement Number 27 Accounting for Pensions by State and Local Governmental Employers or any successor statement, the municipality shall submit to the Auditor General and the state Director of Administration:
- the municipality's most recent actuarial study of the plan(s), and
- management's recommendations for assuring future payments equal to the annual pension cost (APC).
- This information must be submitted within three (3) months of completion of the audited financial statement.
To obtain a copy of GASB Statement Number 27 please contact the Governmental Accounting Standards Board as follows:
Order Department
Governmental Accounting Standards Board
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116
Telephone Orders : 1-800-748-0659.
Please ask for Product Code No. GS27.
The GASB web site can be accessed at www.gasb.org.
REQUESTING CERTIFICATION TO EXCEED THE STATUTORY TAX LIMIT DUE TO AN EMERGENCY SITUATION
If a municipal entity plans to levy a property tax in excess of the limit as defined in Rhode Island General Laws (RIGL) Section 44-5-2 entitled "Maximum Levy", it must obtain certification from either the Department of Revenue or the Office of the Auditor General (OAG). The conditions under which a municipal entity must request certification are described in the General Laws. If a municipal entity experiences an emergency situation which may require it to increase its tax levy over the prior year’s levy by more than the statutory limit, the municipal entity must apply to the Auditor General to certify the emergency. The Standards and Procedures are available for requests of the Auditor General to certify the existence of an emergency situation.
In order to facilitate an application with the Office of the Auditor General, the finance officer of the municipal entity should submit the following:
- a letter signed by the chief executive officer of the municipal entity, requesting to exceed the property tax limit;
- Schedule A and Schedule B completed to support the amount of the total override requested from the Auditor General;
- a detailed budget document for the current fiscal year, (if proposed emergency situation exist in school budget, include detailed line item budget for both town and school);
- a detailed proposed budget document for new fiscal year with each emergency situation clearly identified in budget document, (if proposed emergency situation exists in school budget, include detailed line item budget for both town and school);
- information supporting the emergency nature of each item requested (e.g., current and projected student population data for 3 or more years as evidence of significant growth in student population);
- a signed certification by the municipal entity (including school district, if applicable) as to the financial facts in support of the request to the Auditor General and also that there are no other line items in the budget that can be reduced; and
- other information deemed relevant to your request.
Please submit your request to the Office of the Auditor General, along with all required documentation, at least 30 days before the date that you require a response.
This procedure only applies to requests to this office for certification to exceed the property tax limit due to emergency situations. If you need an override for other conditions described in the general laws, you must petition the Division of Municipal Finance under the Director of Revenue. Phone (401-574-9900). Web page https://municipalfinance.ri.gov/financial-tax-data/property-tax-cap.Rhode Island General Law Section 45-12-2.1 requires:
- Effective January 1, 2008, a city or town shall have authority to incur debt for money borrowed, through the issuance of bonds, if such application for approval of bonds is approved by the Auditor General as described below, as meeting all of the following standards:
- The city or town has a long-term unenhanced credit rating from one nationally recognized credit rating agency in at least the "A" rating category without regard to gradations within such category;
- The city or town has represented in the application that the proposed bonds will finance a capital asset or assets and the average useful life of the capital asset or assets to be financed will be greater than or equal to the average maturity of the proposed borrowing as determined by an appropriate official of the city or town at the time of the issuance of bonds therefore under this section or notes therefore under §45-12-18;
- The city or town is in compliance with financial reporting requirements as set forth in §45-10-5 and is not subject to enforcement proceedings or remedies as provided for in §45-12-22.7; and
- The authorization for the issuance of such bonds has been approved by local referendum at a general or special election or financial town meeting.
- Notwithstanding any provision of the general or public laws, or rule or regulation to the contrary, the projects or activities set forth in this act receiving ministerial approval shall not qualify for school housing aid as set forth in Chapter 16-7 of the general laws.
- No ministerial approval pursuant to this section shall be given by the Auditor General for tax year synchronization bonds, pension obligation bonds or bonds to fund other post employment benefits.
Procedure for Requesting Ministerial Approval of Bonded
- In order to assist municipalities going through the ministerial approval process this office has issued an Application for Ministerial Approval of Bonded Debt and Instructions For Application for Ministerial Approval of Bonded Debt Pursuant to Rhode Island General Law 45-12-2.1.
- Upon the submission of a complete application from a city or town, the Auditor General shall within thirty (30) days determine whether the standards set forth in this section have been met.
- If the standards have been met, then the Auditor General shall give approval to the application and the city or town shall have the power under law to issue bonds, provided it is otherwise lawful;
- If the Auditor General finds that the borrowing does not meet said standards, the city or town shall be notified that the certification standards have not been met, which notification shall state the standards that were and were not met, and if otherwise required, the city or town shall seek special statutory authority as provided in §45-12-2.
The Auditor General shall submit a copy of each approval and each notification that approval has been denied within five (5) business days after issuance to the director of administration and the chairpersons of the house committees on corporations and finance and the chairpersons of the senate committees on housing and municipal government and finance.
RHODE ISLAND SCHOOL DISTRICTS
Local School District Deficits
Rhode Island General Laws Section 16-2-9 requires that:
- The school committee of each school district shall be responsible for maintaining a school budget that does not result in a debt. (16-2-9(d))
- In the event that any obligation, encumbrance, or expenditure by a superintendent of schools or a school committee is in excess of the amount budgeted, or that any revenue is less than the amount budgeted, the school committee shall prepare and submit a corrective action plan as follows: (16-2-9(f))
- Within five (5) working days of its discovery of potential or actual over expenditure or revenue deficiency,
- submit to the town council president and such other person who by local charter or statute serves as the city or town's executive officer;
- a written statement of the amount of and cause for the over obligation or over expenditure or revenue deficiency, and
- a written statement of the school committee's plan for corrective actions necessary to maintain a school budget that does not result in a debt.
- Request approval of the plan from the Auditor General.
Please refer to the additional requirements of Rhode Island General Laws Section 45-12-22.1 through 45-12-22.7 which describe procedures to be followed by municipalities and local and regional school districts in monitoring their financial operations, reporting projected deficits, and developing corrective action plans.
Local School District Appropriation Deficiencies
Rhode Island General Laws Section 16-2-21.4 requires that:
- Whenever a city or town school committee determines that its budget is insufficient to comply with the provisions of the sections 16-2-21, 16-7-23, or 16-7-24 it must follow the steps required by section 16-2-21.4. This process may eventually result in a decision by the school committee to seek additional appropriations by bringing an action in the superior court.
Effective July 5, 2008 House Bill 7283 Substitute A as amended, revised Rhode Island General Law Section 16-2-21.4 as follows:
When the school committee brings an action in the superior court to increase appropriations, the chief executive officer of the municipality shall cause to have a financial and performance audit of the school department in compliance with generally accepted government auditing standards (as promulgated by the Comptroller General of the United States). It shall be conducted by the Auditor General, the Bureau of Audits, or a certified public accounting firm qualified in performance audits. The results of the audit shall be made public upon completion and paid for by the school committee to the state or private certified public accounting firm. The Auditor General shall select the auditor if the audit is not directly performed by his or her office.
Regional School District Deficits
Rhode Island General Laws Section 16-3-11 requires that:
The school committee of each regional school district shall be responsible for maintaining a school budget that does not result in a debt. (16-3-11(e))
- In the event that any obligation, encumbrance, or expenditure by a superintendent of schools or a school committee is in excess of the amount budgeted, or that any revenue is less than the amount budgeted, the school committee shall prepare and submit a corrective action plan as follows: (16-3-11(e)(3))
- Within five (5) working days of its discovery of potential or actual over expenditure or revenue deficiency,
- submit to the town council president and such other person who by local charter or statute serves as the city or town's executive officer;
- a written statement of the amount of and cause for the over obligation or over expenditure or revenue deficiency, and
- a written statement of the school committee's plan for corrective actions necessary to maintain a school budget that does not result in a debt.
- Request approval of the plan from the Auditor General.
Please refer to the additional requirements of Rhode Island General Laws Section 45-12-22.1 through 45-12-22.7 which describe procedures to be followed by municipalities and local and regional school districts in monitoring their financial operations, reporting projected deficits, and developing corrective action plans.
Regional School District Appropriation Deficiencies
Rhode Island General Laws Section 16-2-21.4 requires that:
- Whenever a regional school committee determines that its budget is insufficient to comply with the provisions of sections 16-2-21, 16-7-23, or 16-7-24 it must follow the steps required by section 16-2-21.4. This process may eventually result in a decision by the school committee to seek additional appropriations by bringing an action in the superior court.
Effective July 5, 2008 House Bill 7283 Substitute A as amended, revised Rhode Island General Law Section 16-2-21.4 as follows:
When the school committee brings an action in the superior court to increase appropriations, the chief elected officials from each of the member municipalities shall cause to have a financial and performance audit of the school department in compliance with generally accepted government auditing standards (as promulgated by the Comptroller General of the United States). It shall be conducted by the Auditor General, the Bureau of Audits, or a certified public accounting firm qualified in performance audits. The results of the audit shall be made public upon completion, and paid for by the school committee, to the state or private certified public accounting firm. The Auditor General shall select the auditor if the audit is not directly performed by his or her office.
Governmental Accounting Standards (GASB)
- List of Pronouncements of the Governmental Accounting Standards Board
- GARS online - GASB offers a good, free (for the basic view) resource tool on their website. One can find all the original statements plus the new implementation guides. More importantly, the codification section brings all the applicable standards and implementation guidance together for ease of reference.
- Technical Inquiries
Government Finance Officers Association (GFOA)
- Best Practices/Advisories | Government Finance Officers Association
- GFOA Certificate for Excellence in Financial Reporting Program (ACFR)
- General Purpose Government Checklist
Single Audit
- Federal Audit Clearinghouse – Search the database of Single Audit Reports
- Uniform Guidance (requirements for the administration of federal grants)
- Uniform Guidance - Frequently Asked Questions
- AICPA - GAQC auditee SEFA practice aids
American Institute of CPAs (AICPA)
U.S. Government Accountability Office (GAO)
State Information
- Division of Municipal Finance
- ERSRI - GASB 68 information (employer reporting information for state-administered cost-sharing and agent pension plans)
- RI General Laws
- Municipal Transparency Portal
- RIDE - Uniform Chart of Accounts Data
Voice 401-222-2435 • Fax 401-222-2111 • Email ag@rioag.gov
State of Rhode Island Web Site
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