Low Risk Audit Designation

Several changes were made in 1997 to the audit requirements, which apply to most school districts that receive federal funds. One of these changes allows recipients to be designated "low-risk auditees" if certain conditions are met. This designation may allow districts to reduce the scope and cost of their annual audit.

Two of the conditions which normally must be met to obtain a low-risk designation are an unqualified audit opinion and no identified material weaknesses in internal controls. These prerequisites can be waived by the cognizant federal agency (for most districts, this will be the U.S. Department of Elementary and Secondary Education) if it determines that the opinion qualification or material weakness does not affect the management of federal awards.

Here is the procedure to obtain such a waiver:

1. Review OMB Circular A-133 (subpart E, section 530) to make sure you meet the other requirements for designation as a low-risk auditee. Your outside auditor can provide you with a copy of A-133 if you do not already have one, and can advise you as to your eligibility.

2. Obtain written concurrence for your waiver request from the Massachusetts Department of Elementary and Secondary Education. Requests arising from audit qualifications due to an absence of a general fixed assets account group or absence of accruals for compensated absences have been routinely granted, as such items are not required under Massachusetts statutory accounting policies. Requests arising from other audit qualifications or from material weaknesses in internal controls will be evaluated on a case by case basis. Send your requests for concurrence to:

   David LeBlanc
   Supervisor of Audit and Compliance
   Massachusetts Department of Elementary and Secondary Education
   75 Pleasant Street
   Malden, MA 02148

3. Send your waiver request to:

   Deputy Chief Financial Officer
   U.S. Department of Elementary and Secondary Education
   Washington, DC 20202

Include with your request copies of your single audits for the prior two fiscal years, your written concurrence from Mass. ESE, and any other supporting information.

U.S. DOE has indicated that it may take up to two months for their approval, so districts which wish to avail themselves of this opportunity in connection with their FY98 audit should act promptly.

For further information, please contact David LeBlanc at (781) 338-6485 or at dleblanc@doe.mass.edu.