Sec. 7-393. Working papers of accountant; preservation for inspection. Civil penalty.
Sec. 7-393. Working papers of accountant; preservation for inspection. Civil penalty. Upon the completion of an audit, the independent auditor shall file certified copies of the audit report (1) with the appointing authority, (2) in the case of a town, city or borough, with the clerk of such town, city or borough, (3) in the case of a regional school district, with the clerks of the towns, cities or boroughs in which such regional school district is located and with the board of education, (4) in the case of an audited agency, with the clerks of the towns, cities or boroughs in which such audited agency is located, and (5) in each case, with the Secretary of the Office of Policy and Management. Such copies shall be filed within six months from the end of the fiscal year of the municipality, regional school district or audited agency, but the secretary may grant an extension of not more than thirty days, provided the auditor making the audit and the chief executive officer of the municipality, regional school district or audited agency shall jointly submit a request in writing to the secretary stating the reasons for such extension at least thirty days prior to the end of such six-month period. If the reason for the extension relates to deficiencies in the accounting system of the municipality, regional school district or audited agency, the request must be accompanied by a corrective action plan. The secretary may, after a hearing with the auditor and officials of the municipality, regional school district or audited agency, grant an additional extension if conditions warrant, provided such extension shall not exceed six months from the date the auditor was required to file such copies. Said auditor shall preserve all of his or her working papers employed in the preparation of any such audit until the expiration of five years from the date of filing a certified copy of the audit with the secretary and such working papers shall be available, upon written request and upon reasonable notice from the secretary, during such time for inspection by the secretary or his authorized representative, at the office or place of business of the auditor, during usual business hours. Any municipality, regional school district, audited agency or auditor who fails to have the audit report filed on its behalf within six months from the end of the fiscal year or within the time granted by the secretary shall be referred by the secretary to the Municipal Finance Advisory Commission established pursuant to section 7-394b, assessed a civil penalty of not less than one thousand dollars but not more than fifty thousand dollars or both, except that the secretary may waive such penalties if, in the secretary's opinion, there appears to be reasonable cause for not having completed or provided the required audit report, provided an official of the municipality, regional school district or audited agency or the auditor submits a written request for such waiver. The secretary may impose any civil penalty assessed pursuant to this section against a municipality, regional school district or audited agency in the form of a reduction in the amount of one or more grants awarded by the secretary, including, but not limited to, any grant payable pursuant to section 12-18b.
(1949 Rev., S. 823; 1959, P.A. 152, S. 87; P.A. 76-68, S. 3, 7; P.A. 77-611, S. 4, 6; 77-614, S. 19, 610; P.A. 87-573, S. 4, 11; P.A. 89-370, S. 13, 15; P.A. 93-422, S. 3; P.A. 22-35, S. 3; P.A. 24-132, S. 17; P.A. 25-133, S. 3.)
History: 1959 act deleted provision re counties; P.A. 76-68 substituted “appointing authority” for “budget-making authority” and provided that where appointing authority is town meeting, report is to be filed with chief executive officer and, additionally, in reports for school, fire or sewer districts, with auditors of public accounts as well as with others as previously provided and included references to audited agencies in accordance with revised definitions in Sec. 7-391; P.A. 77-611 deleted filing requirements with regard to chief executive officer and auditors of public accounts; P.A. 77-614 substituted secretary of the office of policy and management for tax commissioner; P.A. 87-573 inserted provisions concerning school districts, effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 89-370 expanded reporting requirements by deleting provision which required additional copy of report to be filed with clerk of town, city or borough or with board of education only where the appointing authority is the town meeting, deleted reference to sewer or fire district, added Subdiv. (4) re audited agency and added $500 fine for failure by audited agency to have reports filed on its behalf; P.A. 93-422 changed “independent public accountant” to “independent auditor”, changed “school district” to “regional school district”, limited extensions to 30 days, required joint request for extension, added provisions regarding corrective action plan and additional extension, changed required preservation of working papers from two to three years, deleted provision regarding penalties for accountants, increased civil penalty from $500 per report to $1,000 to $10,000, expanded civil penalty to apply to municipalities, regional school districts and auditors and allowed waiver of penalty; P.A. 22-35 added provision re referral by secretary to Municipal Finance Advisory Commission and made technical and conforming changes; P.A. 24-132 added provision limiting additional extension to period not exceeding 6 months, changed required period of preservation of working papers from 3 to 5 years, increased maximum civil penalty from $10,000 to $50,000, added provision re imposition of civil penalty in form of reduction in amount of 1 or more grants, and made a technical change, effective July 1, 2024; P.A. 25-133 made technical changes, effective July 1, 2025.
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Sec. 7-395. Secretary's review of audit report. Public meeting. Chief executive officer's or superintendent's plan for corrective action. Referral to Municipal Finance Advisory Commission. (a) The secretary shall review each audit report filed with said secretary as provided in section 7-393, except said secretary shall review the audit reports on each audited agency biennially and may review the audit reports on any municipality or regional school district biennially, provided such secretary shall, in any year in which he does not review the report of any such municipality or regional school district, review the comments and recommendations of the independent auditor who made such audit. If, upon such review of the audit report, evidence of fraud or embezzlement is found, he shall report such information to the state's attorney for the judicial district in which such municipality, regional school district or audited agency is located. If, in the review of such audit report said secretary finds that such audit has not been prepared in compliance with the provisions of subsection (a) of section 7-394a, or said secretary finds evidence of any unsound or irregular financial practice in relation to commonly accepted standards in municipal finance, said secretary shall prepare a report concerning such finding, including necessary details for proper evaluation of such finding and recommendations for corrective action and shall refer such report to the Municipal Finance Advisory Commission established under section 7-394b. A copy of such report shall be filed with: (1) The chief executive officer of such municipality or audited agency or the superintendent of such school district and, in the case of a town, city or borough, with the clerk of such town, city or borough; and (2) the Auditors of Public Accounts.
(b) If, upon such review of the audit report, the secretary finds (1) that such audit has not been prepared in accordance with subsection (a) of section 7-394a, and the municipality, regional school district or audited agency did not request permission to have the audit report prepared in a manner not in compliance with said subsection; or (2) evidence of unsound or irregular financial practices or management letter comments or lack of internal controls in relation to commonly accepted standards in municipal finance, then the secretary shall prepare a report concerning such finding, including, but not limited to, information to aid in the evaluation of such finding and recommendations for corrective action. The secretary shall submit such report to (A) the Municipal Finance Advisory Commission established pursuant to section 7-394b; (B) the Auditors of Public Accounts; and (C) the chief executive officer and clerk of the municipality, superintendent of schools for the regional school district or chief executive officer of the audited agency.
(c) Upon receipt of a report submitted pursuant to subsection (b) of this section, the legislative body of the municipality, or in a municipality where the legislative body is a town meeting, the board of selectmen, or if the report involves a school district operating within its boundaries, the regional board of education, shall hold a public meeting to discuss the nature of the unsound or irregular financial practices, management letter comments or lack of internal controls in relation to commonly accepted standards in municipal finance, to address potential causes for such practices, comments or lack of internal controls and to inform proposing a plan for corrective action. After such meeting, the chief executive officer of a municipality or audited agency or superintendent of schools for the regional school district shall attest to and explain the secretary's findings and submit a plan for corrective action, in writing, to the secretary.
(d) The secretary shall refer to the Municipal Finance Advisory Commission any municipality that has not been previously referred to said commission pursuant to subsection (b) of this section or section 7-576, 7-576a or 7-576c, provided the municipality has:
(1) A negative fund balance percentage;
(2) Reported a fund balance percentage of less than five per cent in the three immediately preceding fiscal years;
(3) Reported an operating deficit in the two immediately preceding fiscal years and a fund balance percentage of less than five per cent in the immediately preceding fiscal year, as determined by the statement of revenues, expenditures and changes in fund balance of the general fund of the audited financial statements of the municipality;
(4) Issued tax or revenue anticipation notes in the three immediately preceding fiscal years to meet cash liquidity;
(5) Did not file an annual audit report in the twelve months after the end of the fiscal year;
(6) Reported an annual audit that included at least one material or significant audit finding that was reported in the annual audits of the two immediately preceding fiscal years;
(7) Received a bond rating below A from a bond rating agency; or
(8) Been a distressed municipality, as defined in section 32-9p, for fifteen or more consecutive years, provided such municipality has a population of greater than fifteen thousand but less than twenty thousand, as determined by the most recent decennial census.
(e) The secretary may, at the secretary's discretion and based upon the review conducted pursuant to subsection (a) of this section, refer to the Municipal Finance Advisory Commission any municipality that has not been previously referred to said commission pursuant to subsection (b) of this section or section 7-576, 7-576a or 7-576c.
(f) For the purposes of this section, “deficit”, “fund balance” and “fund balance percentage” have the same meanings as provided in section 7-560.
(1949 Rev., S. 825; P.A. 76-68, S. 4, 7; P.A. 77-611, S. 2, 6; 77-614, S. 19, 587, 610; P.A. 78-280, S. 2, 127; P.A. 87-573, S. 7, 11; P.A. 88-360, S. 50, 63; P.A. 89-370, S. 3, 15; P.A. 93-422, S. 6; P.A. 19-193, S. 1; P.A. 22-35, S. 4; P.A. 23-197, S. 2; P.A. 25-168, S. 121.)
History: P.A. 76-68 added references to audits and audited agencies; P.A. 77-611 expanded provisions for review and report with regard to irregular financial practices and noncompliance with requirements; P.A. 77-614 substituted secretary of the office of policy and management for tax commissioner; P.A. 78-280 substituted “judicial district” for “county”; P.A. 87-573 allowed the secretary to review reports biennially and applied provisions to school districts, effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 88-360 provided that the secretary shall review the audit reports on each audited agency biennially and made a technical change; P.A. 89-370 required secretary to refer report to municipal finance advisory commission and made technical change; P.A. 93-422 changed “school district” to “regional school district”, “independent public accountant” to “independent auditor” and “review or audit” to “review of the audit report”; P.A. 19-193 designated existing provisions re audit reports filed with secretary as Subsec. (a), added Subsec. (b) re secretary's finding of audit not prepared in accordance with Subsec. (a) or of evidence of unsound or irregular financial practices, management letter comments or lack of internal controls, added Subsec. (c) re submission of corrective action plan to secretary by chief executive officer or superintendent, added Subsec. (d) re referral by secretary of municipality to Municipal Finance Advisory Commission, added Subsec. (e) re secretary's authority to refer municipality to commission and added Subsec. (f) re definitions of “deficit”, “fund balance” and “fund balance percentage”, effective July 1, 2019; P.A. 22-35 amended Subsec. (d) by substituting “an operating deficit” for “a declining fund balance trend” and adding provision re fund balance percentage of less than 5 per cent in Subdiv. (3), substituting “revenue” for “bond” in Subdiv. (4), and deleting former Subdiv. (6) re general fund annual operating deficit of 2 per cent or more of average general fund revenues and adding new Subdiv. (6) re annual audit with material or significant audit finding; P.A. 23-197 amended Subsec. (c) to add provision re municipal public meeting; P.A. 25-168 added Subsec. (d)(8) re any distressed municipality so designated for 15 or more consecutive years and having a population between 15,000 and 20,000 be referred to the Commission, effective July 1, 2025.
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