Municipal Auditing Act

Conn. Gen. Stat. tit. 7, ch. 111

in effect

Conn. Gen. Stat. § 7-391 Definitions.

7-391. Definitions. When used in this chapter, unless the context otherwise requires, the following terms shall have the meanings herein specified: “Secretary” means the Secretary of the Office of Policy and Management; “municipality” includes each town, consolidated town and city, consolidated town and borough, city and borough; “audited agency” includes each district, as defined in section 7-324, or other municipal utility, the Metropolitan District of Hartford County, each regional council of governments, any other political subdivision of similar character which is created and any other agency created or designated by a municipality to act for such municipality whose annual receipts from all sources exceed one million dollars; “reporting agency” includes each district, as defined in section 7-324, or other municipal utility, each regional council of governments, any other political subdivision of similar character which is created and any other agency created or designated by a municipality to act for such municipality whose annual receipts from all sources do not exceed one million dollars; “appointing authority” means the legislative body of a municipality or the board, committee or other governing body of such audited agency, except in any town where the authority to adopt a budget rests with a town meeting or a representative town meeting “appointing authority” means the board of finance or other board, committee or body charged with preparing the budget, or in a town that has no board of finance or other such board, committee or body, means the board of selectmen or the town council; “audit report” means the report of the independent auditor and the annual financial statements of the municipality or audited agency; “independent auditor” means a public accountant who is licensed to practice in the state of Connecticut and who meets the independence standards included in generally accepted government auditing standards; “public accountant” means an individual who meets standards included in generally accepted government auditing standards for personnel performing government audits and the licensing requirements of the State Board of Accountancy; “receipts” means amounts accrued or received by a municipality, audited agency or reporting agency and reportable as revenues in accordance with generally accepted accounting principles; “municipal utility” means every Connecticut municipality or department or agency thereof, or Connecticut district, manufacturing, selling or distributing gas or electricity to be used for light, heat or power or water. (1949 Rev., S. 821; 1959, P.A. 152, S. 14; 613, S. 11; P.A. 76-68, S. 1, 7; P.A. 77-501, S. 1, 2; 77-614, S. 19, 610; P.A. 80-483, S. 21, 186; P.A. 87-573, S. 2, 11; P.A. 89-370, S. 11, 15; P.A. 93-422, S. 1; P.A. 07-196, S. 7; P.A. 13-247, S. 269.) History: 1959 acts deleted counties from definition of municipality and added regional planning agency and removed county commissioners from definition of budget-making authority; P.A. 76-68 limited definition of “municipality” to towns, cities, boroughs and consolidated towns and cities and consolidated towns and boroughs and defined school, fire, sewer districts etc. as “audited agencies”, defined “appointing authority” and “municipal utility” and removed definition of “budget-making authority”; P.A. 77-501 clarified definition of “appointing authority” with regard to towns vesting budget authority in town meetings; P.A. 77-614 substituted “secretary” and “secretary of the office of policy and management” for “commissioner” and “tax commissioner”; P.A. 80-483 made technical changes; P.A. 87-573 removed school districts and housing authorities from the definition of “audited agencies” and inserted definition of “reporting agency”, effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 89-370 amended definition of “audited agency” and “reporting agency” by deleting reference to “fire district, fire and sewer district, sewer district” and substituting reference to “district, as defined in section 7-324”; P.A. 93-422 changed delineation amount from average annual receipts exceeding $75,000 to annual receipts of $200,000, deleted definition of “independent public accountant” and added definitions of “audit report”, “independent auditor”, “public accountant” and “receipts”; P.A. 07-196 increased delineation amounts for “audited agency” and “reporting agency” from annual receipts of $200,000 to $1,000,000, effective July 1, 2007; P.A. 13-247 substituted “council of governments” for “planning agency” in definitions of “audited agency” and “reporting agency” and made a technical change, effective January 1, 2015.

Conn. Gen. Stat. § 7-392 Making of audits and filing of statements.

7-392. Making of audits and filing of statements. (a) All municipalities shall have all their financial statements audited at least once annually and shall provide for audits in accordance with the provisions of sections 4-230 to 4-236, inclusive. Each audited agency, except a local housing authority, shall have all its accounts audited at least once annually. Such audit shall be made by an independent auditor, as defined in section 7-391, who shall be designated in accordance with the provisions of section 7-396. Any independent auditor so retained to render such an annual or biennial audit shall have his duties and powers defined by said secretary. Any audit rendered under the provisions of this chapter shall be performed in accordance with standards adopted by the secretary by regulation and approved by the Auditors of Public Accounts. (b) Notwithstanding the provisions of subsection (a) of this section, if the charter in any municipality contains provisions applicable with respect to selection of an independent auditor for purposes of such audit, such selection shall be conducted in accordance with the charter, provided such selection shall be subject to approval by the Secretary of the Office of Policy and Management. (c) In conjunction with each audit of its financial statements, each town shall provide for the auditing of the financial statements of each school district operating within its boundaries. In the case of a regional school district, the regional board of education shall provide for such an audit. (d) The Commissioner of Housing shall provide for the auditing of the financial statements of each local housing authority at least once biennially. Such audit may be conducted by an independent auditor or by employees of the Department of Housing, as the commissioner may determine. The commissioner may charge any housing authority for the cost of any such audit of its accounts. Upon completion of any such audit, the commissioner shall file certified copies of the audit report with the chairman and the executive director of the housing authority, with the chief executive officer and the clerk of the municipality in which such housing authority is located and with the Secretary of the Office of Policy and Management. (e) The treasurer or other officer having authority over the financial affairs of any reporting agency shall, annually, file a statement concerning the accounts and finances of such agency with the (1) town clerk of the town in which such agency is located, and (2) Secretary of the Office of Policy and Management, upon the secretary's request. Such statement shall include, but shall not be limited to, a listing of major disbursements and sources of receipts and shall be filed not later than ninety days after the end of the fiscal year or period which is the subject of the statement. Each treasurer or other officer who fails to file a statement required pursuant to this subsection shall be fined five hundred dollars for each statement not filed. The fine shall be levied and collected by the town clerk. (1949 Rev., S. 822; 1955, S. 367d; 1957, P.A. 381; 1959, P.A. 217; 1961, P.A. 515; 1972, P.A. 256, S. 1; P.A. 76-68, S. 2, 7; P.A. 77-614, S. 19, 610; P.A. 83-405, S. 1, 2; P.A. 87-573, S. 3, 11; P.A. 88-360, S. 49, 63; P.A. 89-370, S. 12, 15; P.A. 90-78, S. 1, 2; P.A. 91-401, S. 8, 20; P.A. 93-422, S. 2; P.A. 95-250, S. 1; P.A. 96-211, S. 1, 5, 6; P.A. 13-234, S. 2; P.A. 22-35, S. 2.) History: 1959 act increased from $50,000 to $75,000 maximum amount of receipts municipality may have and share cost of audit by tax commissioner with state; 1961 act increased from $150,000 to 200,000 maximum amount of receipts municipality may have to qualify for audit by tax commissioner; 1972 act added circumstances where approval by commissioner of independent public accountant not necessary; P.A. 76-68 changed language to reflect classifications of audited entities as either municipalities or audited agencies as defined in Sec. 7-391 and required that audits meet standards adopted by commissioner and approved by auditors of public accounts; P.A. 77-614 substituted secretary of the office of policy and management for tax commissioner; P.A. 83-405 added Subsec. (b) providing that if the charter contains language applicable to selection of an accountant for such audit, selection is to be conducted in accordance with the charter; P.A. 87-573 deleted provisions concerning the preparing of audits by the office of policy and management and inserted Subsecs. (a), concerning audits of school districts, (d), concerning audits of housing authorities, and (e) concerning reports of reporting agencies, effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 88-360 in Subsec. (c) provided that the regional board of education rather than the towns jointly provide for the audit and made a technical change; P.A. 89-370 amended Subsec. (e) to require filing of statement not later than 90 days after the end of fiscal year or period which is subject of statement; P.A. 90-78 amended Subsec. (e) to provide that the statement of a reporting agency shall include a listing of major expenditures and sources of revenue and that the fine for failure to file shall be levied and collected by the town clerk; P.A. 91-401 amended Subsec. (a) to require that municipalities provide for audits in accordance with Secs. 4-230 to 4-236, inclusive, that each audited agency, except a local housing authority, have its accounts audited at least once annually instead of biennially and that audit be made by auditor instead of public accountant, effective July 1, 1993; P.A. 93-422 amended Subsec. (a) by changing section references from state audit for recipients of state financial assistance, i.e. Secs. 4-230 and 4-232, to municipal auditing act, i.e. Secs. 7-391 and 7-396, amended Subsecs. (a), (c) and (d) by changing subject of audit from accounts to financial statements, amended Subsecs. (b) and (d) by changing “independent public accountant” to “independent auditor” and amended Subsec. (e) by changing “expenditures” to “disbursements” and “revenue” to “receipts”; P.A. 95-250 and P.A. 96-211 replaced Commissioner and Department of Housing with Commissioner and Department of Economic and Community Development; pursuant to P.A. 13-234, references to Commissioner of Economic and Community Development and Department of Economic and Community Development were changed editorially by the Revisors to references to Commissioner of Housing and Department of Housing, respectively, in Subsec. (d), effective June 19, 2013; P.A. 22-35 amended Subsec. (e) by designating existing provision re town clerk as Subdiv. (1) and adding Subdiv. (2) re Secretary of the Office of Policy and Management.

Conn. Gen. Stat. § 7-393 Working papers of accountant; preservation for inspection. Civil penalty.

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.

Conn. Gen. Stat. § 7-394 Publication of notice that audit available for inspection by public.

7-394. Publication of notice that audit available for inspection by public. When the audit provided for in section 7-392 has been made, the municipal clerk shall cause to be published a legal notice in a newspaper having a substantial circulation in such municipality that such audit is on file in his office, for public inspection, within one week after receiving such audit. (1949 Rev., S. 824; P.A. 77-614, S. 19, 610; P.A. 87-573, S. 5, 11; P.A. 93-422, S. 4.) History: P.A. 77-614 substituted secretary of the office of policy and management for tax commissioner; P.A. 87-573 removed provisions concerning audits made by the secretary of the office of policy and management, effective July 1, 1987 and applicable to audits for fiscal years beginning on or after that date; P.A. 93-422 deleted requirement that independent public accountant certificate be included in annual report, corrected reference to source of audit from “herein” to Sec. 7-392.

Conn. Gen. Stat. § 7-394a Principles and standards for audit reports.

7-394a. Principles and standards for audit reports. (a) The audit report prepared by an independent auditor, as defined in section 7-391, retained to render an audit for a municipality, regional school district or audited agency, or by any fiscal officer of such municipality, regional school district or audited agency shall be prepared in accordance with generally accepted accounting principles, generally accepted auditing standards and the provisions of sections 4-230 to 4-236, inclusive. (b) Any municipality, regional school district or audited agency may, however, on the basis of unreasonable hardship directly related to compliance with the provisions of subsection (a) of this section, request permission to have the audit report prepared in a manner not in compliance with said provisions by filing such request in writing with the Secretary of the Office of Policy and Management, including an explanation of the problems related to such compliance and an estimate of the time required to implement changes in existing procedures as necessary to prepare the audit report in accordance with said provisions. (c) The Secretary of the Office of Policy and Management shall adopt regulations as necessary to establish guidelines concerning compliance with the provisions of subsection (a) of this section and concerning any special problems related to such compliance by any municipality, regional school district or audited agency. Such regulations shall, prior to adoption, be submitted to the Municipal Finance Advisory Commission for review as provided in section 7-394b. (d) Notwithstanding the provisions of section 7-396a, any agreement for a grant entered into on or after July 1, 1987, between a state agency and a municipality, regional school district or audited agency which has adopted the uniform fiscal year pursuant to section 7-382, or any of the agencies of such municipality, shall provide that any audit of grant expenditures required by such agreement shall be prepared by the municipality, regional school district or audited agency, in accordance with this section and section 7-382. (P.A. 77-611, S. 1, 6; 77-614, S. 19(d), 587, 610; P.A. 78-303, S. 85, 136; P.A. 86-387, S. 1, 3; P.A. 87-573, S. 6, 11; P.A. 89-370, S. 1, 15; P.A. 93-422, S. 5; May 25 Sp. Sess. P.A. 94-1, S. 6, 130.) History: P.A. 77-614 and P.A. 78-303 substituted secretary of the office of policy and management for tax commissioner; P.A. 86-387 amended Subsec. (a) to delete “Governmental Accounting, Auditing and Financial Reporting” and insert “Governmental Accounting and Financial Reporting Standards” as publications to be followed and added Subsec. (d) concerning audits or state grants; P.A. 87-573 inserted references to school districts and audited agencies, effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 89-370 amended Subsec. (a) to delete requirement that financial reports re fiscal years ending on June 30, 1987, or thereafter, shall be prepared in accordance with principles and standards related to accounting, auditing and financial reporting as outlined in various publications, and to substitute requirement that financial reports re fiscal years ending on June 30, 1989, or thereafter, shall be prepared in accordance with generally accepted accounting principles related to accounting, auditing and financial reporting; P.A. 93-422 changed “financial report” to “audit report”, “independent public accountant” to “independent auditor” and “school district” to “regional school district”, amended Subsec. (a) by adding provision regarding auditing standards and Secs. 4-230 to 4-237, and amended Subsec. (c) by changing requirement from a procedure for consideration of special problems to guidelines concerning special problems; May 25 Sp. Sess. P.A. 94-1 amended Subsec. (b) by substituting “audit” reports for “financial” reports, effective July 1, 1994.

Conn. Gen. Stat. § 7-394b Municipal Finance Advisory Commission.

7-394b. Municipal Finance Advisory Commission. (a) There is established a Municipal Finance Advisory Commission which shall (1) review and submit any recommendations as may be deemed appropriate with respect to any regulations concerning the provisions of section 7-394a, submitted by the Secretary of the Office of Policy and Management for purposes of such review and (2) work with any municipality referred to it pursuant to the provisions of section 7-395, to improve the fiscal condition of such municipality. Upon receipt of the secretary's report pursuant to said section 7-395, the commission shall, in determining the level of financial distress of such municipality, review audits, budgets, accounting and fiscal management practices and any other information relevant to the municipality's fiscal condition. The commission may require the chief executive officer of the municipality to (A) provide such information and appear before the commission to discuss the financial condition of the municipality and the implementation of remedial measures to improve its financial condition and (B) submit a written report to the commission on implementation of the recommendations of the commission and other remedial measures. If a chief executive officer of a municipality fails to provide the information requested or submit the report within thirty days of the request, the commission may assess a civil penalty of not less than one thousand but not more than ten thousand dollars on the municipality. If a chief executive officer of a municipality upon whom a penalty has been imposed submits a request, the secretary may waive all or a portion of such penalty if he determines that a reasonable cause exists for not having provided the requested information or report. The secretary may, as a condition of such waiver, require compliance by a date set by the secretary. (b) Said commission shall consist of eight members appointed by the Governor as follows: (1) Four members who are fiscal or executive officers of municipalities, with one such member from a municipality in each of the following categories of population at the time of such appointment: (A) A municipality with a population under ten thousand, (B) a municipality with a population of at least ten thousand but under twenty-five thousand, (C) a municipality with a population of at least twenty-five thousand but under seventy-five thousand and (D) a municipality with a population of seventy-five thousand or over; (2) three members who are not officers of municipalities but whose experience and knowledge, in the discretion of the Governor, would be valuable for the purposes of said commission, and (3) a representative from the Office of Policy and Management. Members shall be appointed for four-year terms coterminous with the term of the Governor or until a successor is appointed and qualified, whichever is longer, provided the term of any such member shall be contingent upon holding the office, when applicable, which qualified such member for appointment. Vacancies other than by expiration of terms shall be filled by appointment by the Governor for the unexpired term. All members of said commission shall serve without compensation, except for reimbursement for their necessary expenses incurred in the performance of their duties as members. (c) Repealed by P.A. 83-321, S. 2, 3. (P.A. 77-611, S. 3, 6; 77-614, S. 19(d), 587, 610; P.A. 78-303, S. 85, 136; P.A. 83-321, S. 2, 3; P.A. 89-370, S. 2, 15; P.A. 93-421, S. 16, 22.) History: P.A. 77-614 and P.A. 78-303 substituted secretary of the office of policy and management for tax commissioner; P.A. 83-321 repealed Subsec. (c) which had provided for termination of commission on July 1, 1983; P.A. 89-370 amended Subsec. (a) to require commission to work with municipality referred to it pursuant to Sec. 7-395 and review audits, accounting and fiscal management practices and other relevant information in determining level of municipal financial distress and to authorize commission to require chief executive officer to provide such information and appear before commission to discuss financial condition and remedial measures and amended Subsec. (b) to provide that terms of members are coterminous with governor's term “or until a successor is appointed and qualified, whichever is longer” and to delete obsolete provision re termination of terms of commission's first members on July 1, 1979; P.A. 93-421 amended Subsec. (a) by expanding the commission's authority to consider budgets in determining the level of financial distress and adding Subdiv. (B) authorizing the commission to request a written report from the chief executive officer of a municipality and to assess penalty for noncompliance, effective July 1, 1993.

Conn. Gen. Stat. § 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.

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.

Conn. Gen. Stat. § 7-396 Designation of auditor.

7-396. Designation of auditor. The regional board of education and appointing authority of any municipality or audited agency shall file with the Secretary of the Office of Policy and Management the name of the independent auditor, designated to audit the financial statements of the regional school district, municipality, or audited agency, at least thirty days before the end of the fiscal period of such regional school district, municipality, or audited agency for which such audit is required. If any such appointing authority fails to notify the secretary of such designation before such thirty-day period, said secretary may appoint any independent auditor to audit the accounts of such regional school district, municipality or audited agency, and the cost and expense of such audit shall be borne by such regional school district, municipality or audited agency. (1949 Rev., S. 826; P.A. 76-68, S. 5, 7; P.A. 77-614, S. 19, 610; P.A. 87-573, S. 8, 11; P.A. 93-422, S. 7.) History: P.A. 76-68 substituted appointing authority for budget-making authority, included “audited agencies” in accord with revised definitions of Sec. 7-391 and required filing of accountant selected to perform audit within 30 rather than 90 days of fiscal period requiring audit; P.A. 77-614 substituted secretary of the office of policy and management for tax commissioner; P.A. 87-573 inserted references to school districts and reporting requirements of reporting agencies, effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 93-422 applied provisions to regional boards of education, changed “independent public accountant” to “independent auditor”, “records” to “financial statements”, and “school district” to “regional school district”, deleted “for the preceding fiscal year” regarding accounts audited and deleted reference to cost and expense of investigation.

Conn. Gen. Stat. § 7-396a Audits of agencies receiving state grants.

7-396a. Audits of agencies receiving state grants. (a) Any agreement for a state grant entered into between a state agency and a public or private agency shall provide for an audit acceptable to such state agency of any grant expenditures made by such public or private agency and, unless otherwise provided by the state agency, the cost of such audit may be considered an allowable expense under such grant agreement. The Auditors of Public Accounts shall have access to all records and accounts of such public or private agency for the fiscal year in which such grant is made. A copy of any audit performed under the provisions of this section shall be filed with the Auditors of Public Accounts. (b) Notwithstanding the provisions of subsection (a) of this section, in the case of an agreement for a state grant entered into between a state agency and a public or private agency where the state agency has received funding for such grant from the federal government, the cost of any required audit shall be considered an allowable expense under such grant agreement, provided the cost of such audit is an allowable expense under the federal grant regulations. (P.A. 76-68, S. 6, 7; P.A. 84-316, S. 1, 2; P.A. 85-613, S. 20, 154; P.A. 87-573, S. 9, 11; P.A. 88-61, S. 1, 2; P.A. 89-81, S. 2.) History: P.A. 84-316 added Subsec. (c) re payment of cost of audits; P.A. 85-613 made technical changes; P.A. 87-573 inserted a reference to reporting requirements in Subsec. (a), effective July 1, 1987, and applicable to audits for fiscal years beginning on or after that date; P.A. 88-61 authorized in Subsec. (b) the cost of the annual audits of state agency grants to be considered an allowable expense under grant agreements; P.A. 89-81 deleted former Subsec. (a), transferring provisions to Subsec. (c) of Sec. 2-90, and relettered remaining Subsecs.

Source: Connecticut General Assembly (cga.ct.gov)URL: https://www.cga.ct.gov/current/pub/chap_111.htmFetched: 10/20/2026