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Form and Manual:
Effective September 1, 1986, the State Board of Accounts became responsible for the examination of the records and accounts of entities receiving financial assistance from governmental sources. Entities are defined as providers of goods, services, or other benefits that are maintained in whole or in part at public expense or supported in whole or in part by appropriations, public funds or taxation. The definition does not include the state or municipalities, but does include for-profit and not-for-profit corporations, unincorporated associations and organizations and individuals. Financial assistance is defined as payments received in the form of grants, subsidies, contributions, aid, etc.
Entities are primarily nongovernmental organizations, many of which conduct their business as a not-for-profit corporation. By contract or other form of agreement, these entities provide a service or benefit to the public on behalf of and paid for by government.
IC 5-11-1-9 delegates the "oversight" responsibility of these entities to the State Board of Accounts. Specifically, the State Board of Accounts is to ensure that audits, in accordance with agency guidelines, are performed for all entities receiving financial assistance from state or local government sources. The State Board of Accounts is also required to establish a system of review, follow-up, and resolution of any findings of noncompliance identified during the audit process.
As of September 1, 1986, all entities receiving assistance from state and local government, involving federal or non-federal dollars, are subject to audit by State law. Indiana Code 5-11-1-9 requires the complete audit of an entity when the public funds disbursed are equal to or greater than 50% of the entity's total disbursements. The State Examiner may waive the audit requirement if the public funds disbursed are less than 50% of the total disbursements, or at least 50%, but less than $100,000 if the entity is organized as a not-for-profit corporation. The audit requirements may be waived if the State Examiner determines in writing that all disbursements of public funds appear to be made for the purposes for which the funds were received.
Entities subject to the requirements of IC 5-11-1-9 are required to file an Entity Annual Report with the State Board of Accounts within sixty days of the close of their fiscal year. This report provides general information about the entity and also discloses the public funds received and disbursed during the year.
The coordination and administration of audits of entities is somewhat complex. The audits may be performed by the State Board of Accounts or private examiners approved by the State Board of Accounts. Audit costs are to be paid by the entity examined.
The State Board of Accounts actually performs very few of these audits. Due to manpower limitations, ever-increasing audit requirements mandated by federal agencies for state and local governments and the Department's traditional view that government agencies within the State will be audited by the State Board of Accounts, we have allowed the audits of entities to be performed by private examiners approved by the State Board of Accounts. However, when we become aware of suspected instances of fraud or abuse within any of these organizations, the State Board of Accounts has assumed a more active and aggressive role in the auditing process to help ensure that the interests of the taxpayers are protected.
IC 5-11-1-9 requires the State Board of Accounts to develop guidelines for these audits. We have made several revisions to these guidelines since they were originally issued in 1986. Our last revision was made in 2003.
Since most audits of entities are performed by private examiners, contracts for these engagements are submitted to the State Board of Accounts for approval. The Department reviews all contracts to determine if the audit contemplated appears appropriate in relation to the information reported on the Entity Annual Report.
The private examiners are also evaluated during the contract approval process. The State Board of Accounts ensures that these examiners are licensed to practice in the State, are aware of government audit standards, if applicable, do not have a record of performing substandard work, and understand the role of the State Board of Accounts in the audit process.
Although IC 5-11-1-9 allows the engagement of private examiners to perform entity audits, the primary responsibility for the audits remains with the State Board of Accounts. As a result, desk reviews are performed by this Department on all audits performed by private examiners. In addition, field reviews of the private examiner's work are conducted occasionally by our Department