IC 5-11-1-9 gives the SBOA the responsibility for examining all accounts and all financial affairs of every public office and officer, state office, state institution, and entity receiving public money. The State Examiner in accordance with IC 5-11-1-7 may authorize or designate an Independent Public Accountant (IPA) to perform these examination. If the SBOA engages or authorizes the engagement of a private examiner to perform an examination, the examination and report must comply with the requirements established by our agency as set out in uniform compliance guidelines applicable to the unit type being examined.
Our department continues to perform the examination of the majority of units of government that we are statutorily tasked to perform. However, certain unit types are primarily performed by private examiners. These include: county and city hospitals, housing authorities, charter schools, and non-governmental entities receiving governmental assistance. We retain oversight responsibility for audits performed by private examiners and, therefore, are involved in all stages of the process including the approval of auditor selected, review and approval of the engagement letter, review of draft audit reports, and a quality control review of the final audit report. Once the quality control review has been completed, the report is filed on our website as a public record.
To perform audits in accordance with IC 5‑11‑1‑9, the services of an Independent Public Accountant (IPA) are required. IPAs are Certified Public Accountants (CPAs) and Public Accountants (PAs) licensed to practice public accounting in the State of Indiana.
To facilitate the engagement of an IPA, Requests For Proposals (RFPs) should be used to solicit responses from qualified independent auditors (private examiners). The RFP process can result in comprehensive responses that assure audit services offered are consistent with services desired. The RFP process can also provide certain assurances that competitive review and selection procedures were applied in contracting for the audit.
State agencies are required to use the RFP process if they contract for audits of entities they fund. They are required to submit the RFP to the State Board of Accounts for approval, prior to issuance. In addition, the State Board of Accounts will review the evaluation method used in selecting the successful respondent.
Local governments contracting for audits of entities they fund, and entities contracting for their own audit, are not required to issue RFPs. However, the State Board of Accounts does recommend the RFP process for anyone soliciting audit services.
To obtain approval for the audit, the audit contract, or engagement letter, must be submitted to the State Board of Accounts, prior to signing. During our review of the contract, we attempt to ascertain the following:
1.The Auditor selected:
a. Is licensed to practice public accounting in the State of Indiana.
b. Acknowledges awareness of governmental audit requirements (if applicable) and professional standards. If applicable, has maintained professional competence through continuing professional education in accordance with Government Auditing Standards.
c. Has no record of performing substandard audits. If applicable, has obtained an external peer review in accordance with Government Auditing Standards and has provided the most recent peer review report and any letter of comment to both the entity to be audited and the State Board of Accounts.
d. Understands the role of the State Board of Accounts in the audit process.
2. The Audit contemplated:
a. Appears appropriate for the unit and is sufficient in its audit scope.
3. The Contract contains:
a. Reference to and acknowledgement of the responsibility of the State Board of Accounts via reference to State Examiner Directive 2015-2 and inclusion of same via addendum to the contract.
Upon completion of our review, we will issue a written approval or rejection of the contract.
Audits must be performed in accordance with auditing standards generally accepted in the United States of America, commonly referred to as Generally Accepted Auditing Standards (GAAS) and, if applicable, with Government Auditing Standards issued by the Comptroller General of the United States. These standards are applicable to governmental entities and not-for-profit organizations receiving and expending federal awards.
If the during the course of the audit, the auditor discovers or suspects fraud, abuse or illegal acts during the audit of the entity, the State Board of Accounts must be notified immediately, regardless of materiality.
Due to our oversight responsibility for audits performed in accordance with IC 5‑11‑1‑9, a quality control review of an auditor's work is conducted prior to issuance of audit reports by the State Board of Accounts.
A desk review of the audit report is conducted. During this review, attention is focused on the appropriateness and completeness of the report presentation. In addition to performing a desk review of the audit report, a quality control review of the auditor’s working papers may be performed.
Upon completion of our review, the audit report is released and made available for public inspection on our website.
Indiana Code 5-11-1-27(e) provides that through the compliance guidelines authorized under IC 5-11-1-24 the state board of accounts shall define the acceptable minimum level of internal control standards for internal control systems of political subdivisions, including the following: (1) Control Environment. (2) Risk Assessment. (3) Control Activities. (4) Information and Communication. (5) Monitoring.
In response, the SBOA developed the Uniform Internal Control Standards for Indiana Political Subdivisions manual, which contains the acceptable minimum level of internal control standards.
Generally Accepted Government Auditing Standards (the "Yellow Book") prohibits the SBOA from prescribing the actual internal control procedures to be used by a political subdivision. However, the manual provides examples and case studies to demonstrate implementation strategies.
Internal Control Policy and Required Certifications
After June 30, 2016 IC 5-11-1-27(g) provides that the legislative body of each political subdivision must adopt the minimum internal control standards as defined by SBOA. Additionally, the legislative body must ensure that personnel receive training concerning the internal control standards and procedures adopted by the political subdivision.
At the time of submission of the Annual Financial Report (AFR) through Gateway, the fiscal officer must certify that the minimum internal control standards have been adopted and that personnel who are not otherwise on leave status have received training regarding these standards and procedures. Instructions for filing will be found as part of the AFR submission.
Apart from the required certification to be filed by the fiscal officer in Gateway during the submission of the 2016 AFR due March 1, 2017(or August 29, 2017 for Schools)], a certification for each elected official, appointee, and employee that meets the definition of personnel in IC 5-11-1-27(c), should be signed as evidence for their individual training. A certification form is provided below and can also be found under the Appendix found in the Uniform Internal Control Standards for Indiana Political Subdivisions manual. These certifications are to be maintained by the political subdivision on-site.
Indiana Code 5-11-1-27(f) provides that the SBOA develop or designate approved personnel training materials concerning internal controls.
The SBOA has developed and is providing the following training materials on internal controls:
- Uniform Internal Control Standards for Indiana Political Subdivisions manual by the SBOA
- Live presentations by the SBOA at the annual called meetings and conferences around the state.
- The following Webinar:
The webinar can also be downloaded to your local computer by clicking here.
The SBOA has designated the following training materials on internal controls:
- Internal Control - Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
- Guidance papers, principals, or frameworks on Governance and Operational Performance, Internal Controls, Enterprise Risk Management, or Fraud Deterrence by COSO.
- Standards for Internal Control in the Federal Government (the "Green Book") set forth by the Comptroller General of the United States.
In addition, the SBOA recognizes that political subdivisions may find appropriate internal control training materials on their own initiative. So, the following training materials may be designated:
- Materials identified and submitted by political subdivisions, which are approved by the SBOA and/or posted on the SBOA's website. Please contact Debbie Gibson at (317) 232-2512 for further information.
This is a form that our agency may provide to you at the beginning of (or before) an engagement. This form allows us to gain a better understanding of your internal control structure and helps us in the planning of our engagement. There are section on this form that may not be applicable to your unit.