Audit Forms Pdf Gas by kwb16500

VIEWS: 18 PAGES: 82

More Info
									  DESK REVIEW GUIDE FOR
    AUDITS OF MONTANA
LOCAL GOVERNMENT ENTITIES




 MONTANA DEPARTMENT OF ADMINISTRATION
   LOCAL GOVERNMENT SERVICES BUREAU
          AUDIT REVIEW SECTION


         For Audits of Fiscal Year Ended
                 June 30, 2010




                                           Rev. 12/2010
                                              DESK REVIEW

                  AUDIT OF MONTANA LOCAL GOVERNMENT ENTITY

1.   Entity:

2.   Entity Code Number:

3.   Audit Period:

4.   Auditor or Audit Organization (including location):



5.   Date of Report:

6.   Reviewer:

7.   Date of Desk Review:

8.   Other:


               Prior Year Desk Review Excel spreadsheet has been reviewed, and uncorrected items have been
               included in the current review letter.

               “Audit Reports Chosen for Desk Review” spreadsheet has been updated
               (S:\excel\AUDREV\2010 audrev\DeskRevs-2010.xls).

               Desk Review has been entered into the database.

               Results of the Desk Review indicate that the audit report should be reissued (Y/N).

                              Letters to auditor and to entity explaining need for reissuance have been drafted.

                              Database has been updated to indicate that audit report will be reissued.




                                                   -1-
                                            CONCLUSIONS

1.   In my opinion, the report is a: (Note: See pages 4 & 5 for descriptions of report categories.)

     [ ]    Category 1 Report

     [ ]    Category 2 Report

     [ ]    Category 3 Report


2.   Are there other matters to be brought to the auditor’s attention for his/her consideration, although no
     correction or response is required to these matters?

                    [ ] Yes                [ ] No


3.   Based on the results of the desk review, a quality control review (work paper review)

                    [   ] should   OR    [ ] should not

     be considered. (Describe reasons for QCR recommendations.)




4.   Other comments:




                   Audit Quality Control Reviewer                                          Date



                  Supervisor/Concurring Reviewer                                           Date




                                                 -2-
                              SUMMARY RESULTS OF DESK REVIEW


   Standards/            Checklist/    No Noted                 Minor        Deficiencies That      Significant
  Requirements           Reference    Deficiencies         Deficiencies That     Require         Deficiencies That
                                                           Do Not Require     Correction in          Require
                                                              Correction      Future Audit       Reissuance of the
                                                                                 Reports          Audit Report
Audit Report
Submittal Deadlines         1-2
Qualifications &
Independence                 3
Scope of Audit a             4
MD & A a                    5-9
Auditor's Report on
the Financial
Statements                 10-25
RSI & SI
Paragraphs/Reports         26-30
Financial Statement                                                                                                  a
Presentation:                                                                                                        a
   Special Purpose
   Governments &
   OCBOA                   31-36
   Government-Wide
   Statements              37-42
   Fund Statements a       43-60
   DPCUs a                 61-64
Notes to the Financial
Statements                 65-70
RSI (other than
MD&A)                      71-75
Supplemental
Schedules                  76-80
Compliance &
Internal Control
Reports in
Accordance with
GAS                        81-84
Compliance &
Internal Control
Reports in
Accordance with
A-133                      85-96
Other a                   97-102




                                                     -3-
                              DESK REVIEW GUIDE FOR AUDITS OF
                            MONTANA LOCAL GOVERNMENT ENTITIES

                                              INTRODUCTION

Purpose: The objective of a desk review of an audit report is to assure that the audit report meets applicable
reporting standards, including those imposed by Montana laws and administrative rules, the standard audit
contract, and federal single audit act reporting requirements when applicable. The purpose of this guide is to
help assure that the scope of desk reviews is sufficient to fulfill the objective and that the desk reviews are
consistent.

Applicability: This guide is intended for use by the Audit Review Section, Local Government Services
Bureau, of the Montana Department of Administration, when performing desk reviews of Montana local
government entities.

Description: All questions in the checklist have been designed to show "Yes" or "N/A" (not applicable)
answers as favorable responses. All unfavorable (“No”) responses should be fully explained and cross-
referenced. It should be noted that unfavorable answers identify situations that could be undesirable, but do
not necessarily imply that the report is unacceptable. The reviewer must exercise professional judgment
when answering the questions and reaching specific and overall conclusions regarding the audit report. All
questions should be addressed. The reference column is to reference separate pages containing notes
regarding specific questions in the guide.

    Reports are categorized as follows:

    Category 1 Reports: These are reports that are acceptable and contain no noted deficiencies or only
    minor deficiencies that, in the opinion of the reviewer, do not require correction. The reviewer may
    elect to bring other matters to the attention of the auditor for consideration, although no correction or
    response is required. (Audit Review Database – “No Comments” or “Informational Comments Only”)

    Category 2 Reports: These are reports that are acceptable but that contain departures from applicable
    reporting standards and/or instances of noncompliance with contract requirements. The auditor will be
    notified of the deficiencies and requested to make appropriate changes to any local government audit
    reports issued after the date of the notification. The auditor is requested to contact us within 30 days if
    the auditor disagrees with our comments and believes they are inappropriate, or believes that our
    interpretation of the cited references is incorrect. If reports issued by the same auditor after the date of
    notification contain similar deficiencies, the auditor may be required to make changes to the report to
    correct the noted deficiencies. The reviewer may also elect to bring other matters to the attention of the
    auditor for consideration, although no correction or response is required. (Audit Review Database –
    “Deficiencies to be Corrected”)

    Category 3 Reports: These are reports that are unacceptable. They contain significant deficiencies or
    departures from applicable standards. The auditor will be requested to make appropriate changes to the
    audit report to correct the noted deficiencies and to reissue the report. The changes may also require
    additional audit field work on the part of the auditor before the reporting deficiencies can be corrected.
    No response from the auditor is required if the auditor concurs with the comments and agrees to correct
    the noted deficiencies and reissue the report. In addition, the report may contain other deficiencies
    which are not significant enough to require reissuance, but for which the auditor will be requested to
    make appropriate changes to any local government audit reports issued after the date of the notification.
    The reviewer may also elect to bring other matters to the attention of the auditor for consideration,
    although no correction or response is required. (Audit Review Database – “Reissuance Required”)

                                                 -4-
                              DESK REVIEW GUIDE FOR AUDITS OF
                            MONTANA LOCAL GOVERNMENT ENTITIES

                                          INTRODUCTION - cont.

Questions are referenced to professional standards or other requirements. Abbreviations used to reference the
requirements and standards are as follows:

       A-133                 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit
                             Organizations, as Revised June 2007, and Compliance Supplement (June 2010)

       AU                    Professional Standards, U.S. Auditing Standards AICPA (Through SAS 120)

       COD                   Codification of Governmental Accounting and Financial Reporting Standards,
                             GASB (2010 - 2011 Codification as of June 30, 2010)

       GAAFR                 Governmental Accounting, Auditing and Financial Reporting, GFOA (2005
                             Edition)

       GAS                   Government Auditing Standards, Comptroller General of the U.S.; (2007
                             Revision)

       GASB Q&A              Comprehensive Implementation Guide – 2010-2011, Questions and Answers;
                             GASB (Update through 6/30/2010)

       GUIDE-SLG             Audit and Accounting Guide, State and Local Governments, AICPA (March 2010
                             Edition)

       GUIDE–GAS/A-133 Audit Guide, Government Auditing Standards and Circular A-133 Audits, AICPA
                       (May 2010 Edition)

       MCA                   Montana Code Annotated

       OCBOA PA              AICPA Practice Aid “Applying OCBOA in State and Local Governmental
                             Financial Statements”

       SAC                   Standard Audit Contract, Montana Department of Administration (3/07 Revision)


       References: References are provided to enable the reviewer to refer to relevant standards and
       requirements. The reviewer should be familiar with the requirements and standards and have them
       available when performing the desk review. The reviewer should also be familiar with Title 2, Chapter
       7, Part 5, of the Montana Code Annotated, The Montana Single Audit Act; and Rules 2.4.401 through
       2.4.411 of the Administrative Rules of Montana, implementing the Montana Single Audit Act.




                                                  -5-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES    NO      N/A      REF

Audit Report Submittal Deadlines

1.   Has the audit report been received in our office by deadlines established in State and federal
     law, and per the contract?
     (Note 1: Paragraph 15.c. of the contract requires that the auditor send the audit report to the
     Department at the same time that the final audit report is delivered to the entity.)
     (Note 2: State law requires that audit reports be submitted to the Department within 1 year
     from the close of the last fiscal year covered by the audit. (Section 2-7-503, MCA). OMB
     Circular A-133 requires audits performed in accordance with that Circular to be submitted
     within 9 months after the end of the audit period, although a request for extension may be
     made in advance to the federal oversight agency (However, see Note 3, below). (A-133,
     §.320(a)) A copy of any approved extension should be remitted to the Department.
     (Note 3: OMB has established a temporary moratorium on extensions: For FYs 2009
     through 2011, federal agencies may not grant extensions; and late submittal of A-133 reports
     will mean that the entity cannot meet low-risk criteria for the following 2 audits. (OMB
     Memorandum #M-10-14, March 22, 2010))

2.   Is there not a significant amount of time between the auditor’s report date and the date of
     issuance? (Note: If a subsequent event requiring adjustment of the F/S (or disclosure only)
     occurs after the date of the auditor’s report but before the issuance date & the event comes to
     the attention of the auditor, the F/S should be adjusted or disclosure should be made, OR the
     auditor should qualify the opinion. (AU §530) To limit both the auditor’s and entity’s
     exposure to subsequent events, there should not be a significant amount of time elapsed
     between the auditor’s report date and the date of report issuance.)

Qualifications and Independence
(Note: Section 2-7-506, MCA, and Rule 2.4.406 of the Administrative Rules of Montana specify that in order to perform audits of
Montana local governmental entities, an auditor must be on a roster of independent auditors authorized to conduct such audits that is
maintained by the Department of Administration. In order for an auditor to be eligible for inclusion on the roster, the auditor must,
among other things, certify that he or she meets the continuing education requirements required by Government Auditing Standards
(GAS 3.46) and be currently licensed as a certified public accountant (GAS 3.44.)

3.   Is the report free of indications that the auditor is not independent? If not, follow up to
     determine if independence was impaired in appearance or in fact. (GAS 3.02 – 3.30; GAO’s
     Answers to Independence Standard Questions; AICPA’s Ethics Interpretation 101-3; AU §
     220)

Scope of Audit

4.   If the entity expended $500,000 or more in federal awards during the year, is the audit a single
     audit conducted in accordance with OMB Circular A-133 audit requirements?

Management’s Discussion and Analysis (MD&A)

5.   Does the MD&A precede the basic financial statements? (COD 2200.106, GUIDE-SLG 2.09;
     GAAFR pg. 295)
     (Note: In a CAFR, the MD&A (part of the financial section) should follow the letter of
     transmittal (part of the introductory section) (GASB Q&A #7.5.1 & COD 2200.105))




                                                              -6-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

6.   Does the MD&A include: (COD 2200.109; GUIDE-SLG 2.09)                   (See illustrative MD&A
     in COD 2200.907)

     a.   A brief discussion of the basic financial statements, including the relationships of the
          statements to each other, and the significant differences in the information they provide?
          (Note: This discussion should include analyses of why fund financial statements either
          reinforce information in the government-wide statements or provide additional
          information.)

     b.   Condensed financial information derived from government-wide financial statements
          comparing the current year to the prior year & presenting the information needed to
          support the analysis of financial position and results of operations required in c, below,
          including the following elements, if relevant?: (Note: This information should be
          presented in the form of condensed financial statements. Charts and graphs may be used
          to supplement the condensed statements, but not replace them. (GASB Q&A #7.5.10))

          (1) Total assets, distinguishing between capital and other assets?

          (2) Total liabilities, distinguishing between long-term liabilities and other liabilities?

          (3) Total net assets, distinguishing among amounts invested in capital assets, net of
              related debt; restricted amounts; and unrestricted amounts?
          (4) Program revenues, by major source?

          (5) General revenues, by major source?

          (6) Total revenues?

          (7) Program expenses, at a minimum by function?

          (8) Total expenses?

          (9) Excess (deficiency) before contributions to term and permanent endowments or
              permanent fund principal, special and extraordinary items, and transfers?

          (10) Contributions? Special and extraordinary items? Transfers?

          (11) Change in net assets?

          (12) Ending net assets?

     c.   An analysis of the government’s overall financial position and results of operations to
          assist users in assessing whether financial position has improved or deteriorated as a
          result of the year’s operations? (Note: This analysis should address both governmental
          and business-type activities as reported in the government-wide financial statements and
          should include reasons for significant changes from the prior year, not simply the
          amounts or percentages of change. In addition, important economic factors, such as
          changes in the tax or employment bases, that significantly affected operating results for
          the year should be discussed. )

     d.   An analysis of balances and transactions of individual funds, including the reasons for
          significant changes in fund balances or fund net assets and whether restrictions,
          commitments, or other limitations significantly affect the availability of fund resources
          for future use? (Note: This analysis would normally be confined to major funds,
          although nonmajor funds may be included. (GASB Q&A #7.5.8))




                                                                 -7-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

     e.   An analysis of significant variations between original and final budget amounts and
          between final budget amounts and actual budget results for the general fund (or its
          equivalent), including any currently known reasons for those variations that are expected
          to have a significant effect on future services or liquidity? (Note: The reasons for
          variances should be discussed; it is not sufficient to state that there were higher-than-
          expected expenditures. (GASB Q&A #7.5.11))

     f.   A description of significant capital asset and long-term debt activity during the year,
          including a discussion of commitments made for capital expenditures, changes in credit
          ratings, and debt limitations that may affect the financing of planned facilities or
          services? (Note: For this purpose, it is sufficient to summarize information already
          disclosed in the notes and make reference to these notes for additional details. (COD
          2200, footnote 9; GUIDE-SLG 7.67 & 8.113))

     g.   If the government uses the modified approach to report some or all of their infrastructure
          assets, a discussion including those items listed in COD 2200.109g?

     h.   A description of currently known facts (information that management is aware of as of
          date of auditor’s report), decisions, or conditions that are expected to have a significant
          effect on financial position or results of operations? (Note 1: This element should not
          include a discussion of the possible effect of potential future events or decisions. (GASB
          Q&A #7.5.13 & 7.5.14 & COD 2200, footnote 6; GUIDE-SLG 2.09)) (Note 2: If
          applicable, it may be necessary to include a discussion of subsequent events or going
          concern issues here – COD 2250.113 & .117 & 2200.109 footnote 11)

7.   Does the MD&A not include information that doesn’t relate to the required topics?
     (Note: The nature of RSI does not permit governments to voluntarily expand the contents of
     RSI beyond the required elements. Governments can provide additional details about the
     required topics a through h, above. However, information that does not relate to the required
     topics should not be included in MD&A, but may be reported as SI or discussed in the letter
     of transmittal. (GASB Q&A # 7.5.7; COD 2200, footnote 8; GUIDE-SLG 2.09 & 14.55))
-




8.   If the reporting entity has component units that issue separate financial statements, does the
     MD&A refer readers to those separately issued financial statements? (COD 2200.108)
     (Note: The MD&A should focus on the primary government and should distinguish between
     information pertaining to the primary government and that of its component units.
     Discussing matters related to a component unit in the MD&A is a matter of professional
     judgment.)

9.   If a government (single-program or business-type activity) presents comparative financial
     statements, does the MD&A address both years presented in the comparative financial
     statements (i.e., are 3 years of comparative data presented, and does the related analysis cover
     two periods)? (GASB Q&A #7.5.4) (Note: If a government (engaged in both governmental
     and business-type activities) presents comparative data, (e.g., total reporting entity columns
     for current and prior years in government-wide statements) the MD&A does not need to
     address both years. (GASB Q&A #7.5.6))

Auditor’s Report on the Financial Statements

10. Is the report addressed to the government or its governing board? (AU 508.09)




                                                                -8-
DESK REVIEW – 2010

REVIEW ITEM                                                                                               YES   NO   N/A   REF

11. If prior period financial statements are presented on a comparative basis with those of the
    current period, does the auditor’s report cover all periods presented in the financial
    statements, including those prior period(s)? (AU 508.65) (Note: Comparative financial
    statements, which provide a full GAAP presentation for each individual year, are to be
    distinguished from comparative data. For a discussion of complete and partial/summarized
    (e.g., total column only) presentations of prior period information, see GUIDE-SLG 14.33 -
    14.37 & GAAFR pg. 159.)

12. If the entity is a component unit of another entity, is this fact disclosed in the auditor’s report
    (in the introductory paragraph)? (GUIDE-SLG 14.45 & 14.79- Example A-2)

13. STANDARD UNQUALIFIED REPORT: Does the audit report contain the following
    items: (AU 508.08; GUIDE-GAS/A-133, 4.22 & 4.51, Example 4-1; GUIDE-SLG 14.79,
    Example A-1)(OCBOA Reports - AU 623.05; GUIDE-SLG 15.11, Examples A-1 & A-2)

    a.   A title that includes the word independent?

    b.   An introductory paragraph that:

         (1) States that the financial statements identified in the report were audited? (Note:
             This paragraph should refer to the audit of the financial statements of each opinion
             unit. (GUIDE-SLG 14.13))

         (2) States that the financial statements are the responsibility of management and that the
             auditor’s responsibility is to express opinions on the financial statements based on
             his audit? (GUIDE-SLG 14.14)

         (3) If prior period financial statements are presented for comparative purposes (for
             example, in the case of single-purpose BTA presentations):

              (a) and if the prior period statements are restated in the current period, does the
                  auditor’s updated report indicate that the statements have been restated? (AU
                  508.68 & .69)

              (b) and were audited by a predecessor auditor, has the appropriate terminology been
                  used? (See AU 508.74)

              (c) and were audited by an auditor who has ceased operations, has the appropriate
                  terminology been used? (See AU 9508.60 - .75)

         (4) If prior-period financial information is presented in partial/summarized form, does
             the auditor clearly describe in the introductory paragraph the degree of responsibility
             he/she is assuming in relation to that prior-period information? (See sample
             language at GUIDE-SLG 14.37) (Note: If the prior financial statements have been
             restated, that fact should be disclosed also – see AU 508.69 for possible language
             that might be used. If the prior-year was audited by a predecessor auditor see AU
             508.74 for suggested language.)




                                                                 -9-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

13. STANDARD UNQUALIFIED REPORT – continued:
   c.   A scope paragraph that:

        (1) States that the audit was conducted in accordance with auditing standards generally
            accepted in the U.S. (or U.S. generally accepted auditing standards) (GAAS) and
            Government Auditing Standards? (GAS 5.05, 1.12 & 1.13)
            (Note: Modified GAS Compliance Statement: If the audit was performed in
            accordance with GAS, except for specific requirements that weren’t followed, OR if
            the auditor was unable to or did not perform the audit in accordance with GAS, a
            modified GAS compliance statement should be used. (GUIDE-GAS/A-133, 4.24 –
            4.25; GAS 1.12 & 1.13) If the financial statements include organizational units that
            are not required to have a GAS audit, the auditor should modify the scope paragraph
            accordingly. (GUIDE-GAS/A-133, 4.51, Example 4-1, footnote 5))

        (2) States that those standards require that the auditor plan and perform the audit to
            obtain reasonable assurance about whether the financial statements are free of
            material misstatement?

        (3) States that the audit includes:

            (a) OPTIONAL - Consideration of internal control over financial reporting as a
                basis for designing audit procedures that are appropriate in the circumstances,
                but not for the purpose of expressing an opinion on the effectiveness of the
                Entity’s internal control over financial reporting. Accordingly, we express no
                such opinion. (AU 9508.85 - .88; GUIDE-SLG, 14.79, Example A-1, footnote 2;
                GUIDE-GAS/A-133, 4.51, Example 4-1, footnote 4)

            (b) Examining, on a test basis, evidence supporting the amounts and disclosures in
                the financial statements, Assessing the accounting principles used and
                significant estimates made by management, and Evaluating the overall financial
                statement presentations?

        (4) States that the auditor believes that his audit provides a reasonable basis for his
            opinions?

   d.   An opinion paragraph that gives an opinion as to whether the financial statements present
        fairly, in all material respects, the respective financial position of each of the opinion
        units of the entity as of the balance sheet date and the respective changes in financial
        position, and, where applicable, cash flows, for the period then ended in conformity with
        the basis of accounting described (accounting principles generally accepted in the U.S.
        (or U.S. generally accepted accounting principles), or other comprehensive basis of
        accounting (OCBOA))? (GUIDE-SLG 14.12) (Note 1: The auditor should not refer to
        consistency in this paragraph. (AU 508.16)) (Note 2: Opinion units in the basic
        financial statements are (as applicable) (1) the governmental activities, (2) the business-
        type activities, (3) the aggregate discretely presented component units, (4) each major
        governmental and enterprise fund, and (5) the aggregate remaining fund information
        (nonmajor governmental and enterprise funds, internal service fund types, and fiduciary
        fund types). The financial statement reconciliations presented on the fund financial
        statements relate to the governmental activities and BTA opinion units. (GUIDE-SLG
        14.04 & 4.33 – 4.34)) (Note 3: If not quantitatively or qualitatively material, the two
        aggregate opinion units (opinion units (3) & (5), in Note 1 above) may be combined into
        a single opinion unit, referred to as the “aggregate discretely presented component unit
        and remaining fund information” opinion unit. (GUIDE-SLG 14.04 & 4.35))
        SEE: GUIDE-SLG 4.32 Exhibit 4.1 for overview of reporting units and opinion units,
        and GUIDE-SLG 4.36 for determination of opinion units for special-purpose
        governments.


                                                              -10-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

13. STANDARD UNQUALIFIED REPORT – continued:
         (1) Does the opinion paragraph make reference to cash flows only if the financial
             statements are required to present a statement of cash flows, and does it refer to
             “where applicable, cash flows” only if some (not all) opinion units are required to
             present statements of cash flows,? (GUIDE-SLG, 14.79, Appendix A, A-1 (7th
             bullet))

         (2) For special purpose districts engaged in only one business-type activity, is only one
             opinion rendered? (GUIDE-SLG 14.09 & 14.79, Example A-2))

         (3) For special purpose districts engaged in a business-type activity(ies) with more than
             one enterprise fund, is an opinion rendered on each major fund (and on the aggregate
             remaining information, if applicable)? (GUIDE-SLG, 4.36 & 14.09, footnote 4)

         (4) Are the opinion units referenced in the introductory paragraph the same as the
             opinion units that are opined on, and are they appropriate for the reporting units
             presented in the financial statements? (GUIDE-SLG 4.32, Exhibit 4-1) (See
             GUIDE-SLG 4.36, 12.05 – 12.09 & 14.79, Examples A-2 & A-3 for opinion units for
             special purpose governments.)

    e.   Following the opinion paragraph, either (1) a description of the scope of the auditors’
         testing of internal control over financial reporting and compliance with laws, regulations,
         and provisions of contracts or grant agreements, and the results of those tests, or (2) a
         reference to separate report(s) containing that information? If option (2) is used, the
         paragraph should state that “The purpose of that report is to describe the scope of testing
         of internal control over financial reporting and compliance and the results of that testing,
         and not to provide an opinion on the internal control over financial reporting or on
         compliance.” and “That report is an integral part of an audit performed in accordance
         with Government Auditing Standards and should be considered in assessing the results of
         the audit.” (GAS 5.07 – 5.09)
    f.   The manual or printed signature of the auditor’s firm?

    g.   The date of the audit report?
         (Note: The date should reflect the date on which the auditor has obtained sufficient
         appropriate audit evidence to support the opinion (including review of documentation,
         F/S preparation and management representations), rather than the date of completion of
         field work. (AU 530.01))

14. BIENNIAL REPORT: If the audit covers two fiscal years (biennial audit), does the
    Independent Auditor’s Report refer to both fiscal years in the introductory paragraph, and is
    an opinion rendered on the financial position of the entity as of each fiscal year-end (i.e.,
    opinions should be rendered on two fiscal years, rather than on one two-year period.)? (See
    AU §508 for examples of wording for two-year audits) (SAC, para. 8.d.; AU §508)

15. OCBOA REPORT: If the financial statements are intended to be presented in accordance
    with an other comprehensive basis of accounting (OCBOA), does the report also include an
    explanatory paragraph that: (GUIDE-SLG 15.08 & 15.11, Example A-1; AU 623.05)

    a.   States the basis of presentation and refers to the note to the financial statements that
         describes the basis?

    b.   States that the basis of presentation is a comprehensive basis of accounting other than
         generally accepted accounting principles?




                                                               -11-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

16. If the government presents the required budgetary comparison information as a basic financial
    statement rather than as RSI, does the opinion paragraph refer to the budgetary comparisons
    for the general and major special revenue funds? (GUIDE-SLG 14.14) (See GUIDE-SLG
    14.79, Example A-1, footnote 3) (Note: If the entity has perspective differences, it must
    present budgetary comparisons as RSI, and cannot present this information in a basic
    financial statement. (COD 2400.102, footnote 1)

17. If the auditor makes reference to the work of another auditor (AU 543.07; GUIDE-SLG
    14.26): (See GUIDE-SLG 14.79, Example A-9)

    a.   Does the report make reference to the other auditor in the introductory, scope, and
         opinion paragraphs?

    b.   Does the report indicate the division of responsibility and the magnitude of the portion of
         the financial statements audited by the other auditor? (Note: If another auditor audits a
         PG’s only DPCU, the report should still indicate, in the intro paragraph, the principal
         auditor’s responsibility for auditing that opinion unit and should express or disclaim an
         opinion on that opinion unit.)

    c.   If the other auditor is named, is the other auditor’s report included with that of the
         principal auditor?

18. QUALIFIED OPINION: If the opinion(s) is (are) qualified, is the qualification the result of
    a material departure from GAAP or other comprehensive basis of accounting (OCBOA), or
    the result of a scope limitation? (AU 508.20, 623.06)

    a.   Has the appropriate qualifying language been used in the opinion paragraph (i.e., “except
         for” or “exception”)? (AU 508.21)

    b.   If a qualified report was issued due to a scope limitation for one or more opinion units:
         (GUIDE-SLG 14.19 & 14.20; See GAS 1.12 for qualified GAS Compliance paragraph)

         (1) Does the report include an explanatory paragraph (describing the situation) that
             precedes the opinion paragraph and is referred to in both the scope and opinion
             paragraphs? (AU 508.25)

         (2) Does the opinion paragraph indicate that the qualification pertains to the possible
             effects on the financial statements and not to the scope limitation itself (i.e., the
             qualification is because the auditor is unable to reach a conclusion on one or more
             matters material to the financial statements, rather than because his or her procedures
             were restricted)? (AU 508.26)

         (3) If the scope restriction is significant and is client-imposed, was a disclaimer of
             opinion on the financial statements issued? (AU 508.24 &.62; GUIDE-SLG 14.21)
             (See item #20, below)

    c.   If review of the financial statements indicates a material departure from GAAP or
         OCBOA, is the opinion(s) modified? (AU 508.35 – 508.57, 623.06)
         (Note 1: GUIDE-SLG 14.22 lists GAAP departures that, depending on materiality,
         would require opinion modifications: (1) financial info for a fund, etc., or one or more
         (but not all) component units, omitted from the statements (COD 2600.123 & GUIDE-
         SLG 14.79, Ex. A-4***); (2) a portion of the reporting entity doesn’t apply GAAP; (3)
         general capital assets omitted from the GW statements; (4) the entity accounts for
         infrastructure assets using the modified approach but no longer qualifies; (5) fund
         statements don’t report one or more funds as major, when required; or (6) a required
         note disclosure omitted.)

                                                               -12-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

         (Note 2***: Because the standard audit contract requires an audit of the entire
         reporting entity (SAC, para. 3.f.), the explanatory paragraph should not state “we were
         not engaged to audit” a component unit.)

         (1) If component unit (CU) information in a reporting entity’s financial statements is not
             in conformity with GAAP and if the departure is material to the financial statements,
             has the auditor modified the opinion appropriately? (GUIDE-SLG 3.33, 14.41 -
             14.44)

    d.   If a qualified opinion was issued due to a departure from GAAP or OCBOA: (AU
         508.37 – 508.39, 623.06; GUIDE-SLG 14.23) (See example at GUIDE-SLG 14.79,
         Example A-5)

         (1) Does the report include an explanatory paragraph that precedes the opinion
             paragraph and is referred to in the opinion paragraph, and that describes all
             substantive reasons that led to a conclusion that there has been a departure from
             GAAP or OCBOA?

         (2) Does this explanatory paragraph describe, or refer to a footnote that describes, the
             principal effects of the subject matter of the qualification on the financial position,
             changes in financial position or cash flows for the opinion unit(s), or a statement that
             the effects are not reasonably determinable?

    e.   Does the format of the opinion paragraph(s) clearly describe which opinion units are
         qualified? (Note: The AICPA-recommended format contains at least two opinion
         paragraphs when a qualified opinion is rendered on one or more opinion units. See
         GUIDE-SLG 14.79 for illustrative Auditor’s Reports.)

19. ADVERSE OPINION: If an adverse opinion is issued for either one or more opinion units,
    or for the financial statements taken as a whole (GUIDE-SLG 14.24 & 14.25; See examples
    at GUIDE-SLG 14.79, Examples A-6 – A-8):

    a.   Does the report include a separate explanatory paragraph that precedes the opinion
         paragraph and describes: (AU 508.59)

         (1) All substantive reasons for the adverse opinion(s)?

         (2) The principal effects of the subject matter of the adverse opinion(s) on the financial
             position, changes in financial position or cash flows for the opinion unit(s), or a
             statement that the effects are not reasonably determinable?

    b.   Does the opinion paragraph refer to the explanatory paragraph and does it state that the
         financial statements do not present fairly in conformity with GAAP? (AU 508.60)

20. DISCLAIMER OF OPINION: If a disclaimer of opinion on the financial statements taken
    as a whole is issued does the report: (AU 508.62 -508.63; GUIDE-SLG 14.21)

    a.   State in the introductory paragraph that “We were engaged to audit” rather than “We
         have audited”, and omit the statement that the auditor’s responsibility is to express an
         opinion?

    b.   Omit a description of the procedures performed and the characteristics of an audit (i.e.,
         omit the scope paragraph)?

    c.   State the reasons why the audit did not comply with GAAS in a separate paragraph?


                                                              -13-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

    d.   State that the scope of the work was not sufficient to warrant expression of an opinion?

21. If the government-wide or fund financial statements are not presented, has the auditor
    expressed an adverse opinion on the financial statements taken as a whole? (GUIDE-SLG
    14.10 & 14.79, Example A-8)

22. If adverse opinions or disclaimers of opinion are appropriate for both the governmental
    activities and business-type activities opinion units, has the auditor expressed an adverse
    opinion or disclaimer of opinion on the financial statements taken as a whole? (GUIDE-SLG
    14.10) (Note: If the only required presentation for the primary government is that of
    governmental activities, and if an adverse opinion or disclaimer of opinion is appropriate for
    the governmental activities opinion unit, that same opinion should be expressed on the
    financial statements taken as a whole.)

23. If general infrastructure assets have been omitted from the financial statements, has the
    auditor expressed an adverse opinion? (Note: A general-purpose government’s general
    infrastructure assets are presumed to be material in relation to its governmental activities
    unless demonstrated otherwise. An exception would be some special-purpose districts, such
    as school districts, that have little or no general infrastructure assets.) (GUIDE-SLG 14.24
    & 14.79, Example A-6)

24. If a fund is not reported as major in conformity with the quantitative criteria for major funds,
    has the auditor expressed an adverse opinion for that opinion unit? (GUIDE-SLG 14.24,
    14.40 & 14.79, Example A-10) (Note: If the fund is reported within the nonmajor funds, the
    auditor may need to qualify the aggregate remaining fund information opinion unit also.)

25. Explanatory paragraphs:
    a.   CONSISTENCY: If there has been a change in accounting principles, or in the method
         of their application, that has a material effect on the comparability of the entity’s
         financial statements, is there an explanatory paragraph, and does it: (AU 508.16 - .18;
         AU Section 420)
         (Note 1: A change in accounting principle results from adoption of a generally accepted
         accounting principle different from the one used previously for reporting purposes. (AU
         420.06))
         (Note 2: A change in presentation of cash flows due to a change in an entity’s policy for
         determining cash equivalents requires recognition in an explanatory paragraph, and a
         restatement of prior year financial statements presented for comparative purposes. (AU
         420.14; COD 2450.108))
         (Note 3: A change in major funds is not considered to be a change in accounting
         principle and no explanatory paragraph is needed. (GUIDE-SLG 14.39))

         (1) Follow the opinion paragraph?

         (2) Identify the nature of the change and refer to a note?

         (3) Refrain from stating concurrence with the change?

    b.   CORRECTION OF AN ERROR/CHANGE IN PRINCIPAL: If there has been a
         change in reporting entity or other change in accounting principle due to correction of an
         error, is there an explanatory paragraph as discussed in a. above? (AU 420.07 - .09;
         GUIDE-SLG 3.36)
         (Note 1: A change in the reporting entity is a special type of change in accounting
         principle. A change resulting from a transaction or event (such as creation or cessation
         of a business unit) does not require this explanatory paragraph, but if the change does
         not result from a transaction or event a paragraph is required. (AU 420.07 – 420.09)


                                                              -14-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

         (Note 2: A change from a principle that is not generally accepted to one that is generally
         accepted, including correction of an error in application of a principle, is a correction of
         an error. Correction of an error in principle requires recognition in an explanatory
         paragraph. (AU 420.12))
         (Note 3: An error correction that doesn’t involve an accounting principle or application
         of accounting principle (i.e., math error, oversight, misuse of facts) does not need to be
         recognized in an explanatory paragraph. (AU 420.16))

    c.   If there has been a departure from a promulgated accounting principle, is there an
         explanatory paragraph that describes the departure, its effect (if practical), and reasons
         why compliance with the principle would be misleading? (AU 508.14 – 508.15)

    d.   EMPHASIS OF A MATTER: If the auditor has included an explanatory paragraph
         related to other matters that he(she) wants to emphasize, is the opinion paragraph free of
         phrases such as “with the foregoing (following) explanation”? (AU 508.19)

Required Supplementary Information (RSI) Paragraph

26. Has the auditor provided either of the following for RSI (i.e., MD & A; Budgetary
    Comparison Schedules; & OPEB)? (AU 558.04, .05, .08, & .09; AU 551.04, .15 &.16;
    GUIDE-SLG 14.52, Exhibit 14-1)
    (Note: For RSI in an auditor-submitted document*, the auditor should (a) express an opinion
    on the information if engaged to examine the information; (b) report on such information “in
    relation to” to the audit of the basic financial statements (this requires that the information be
    subjected to auditing procedures); or (c) disclaim an opinion on the information. *”Client-
    prepared documents” include financial reports prepared by the client but merely reproduced
    by the auditor on the client’s behalf. (AU 558A.08, footnote 7 & 558A.05, footnote 4))

    a.   a disclaimer of opinion that identifies the U.S.GAAP standards* ,(See AU 551A.15 &
         GUIDE-SLG 14.79, Example A-1for suggested wording) (Note: *“GASB” may be
         referenced here as the body requiring the information. GUIDE-GAS/A-133 4.51,
         Example 4-1, footnote 8)) (If SAS 120 early implemented – see checklist item #28
         below)
                                              OR

    b.   an in-relation-to opinion (See AU 551A.12 & .14 & GUIDE-SLG 14.79, Example A-1
         for suggested wording) (See checklist item #29 for required elements.) (If SAS 119 &
         120 early implemented – see AU 551 & checklist item #30, below.)

27. Pre-SAS 120: Has the auditor reported on the RSI (i.e., included an explanatory paragraph) if
    any of the following conditions exist (regardless of whether the document is auditor-
    submitted or client-prepared): (GASB 34, para. 292; AU 558A.08; GUIDE-SLG 14.56) (See
    AU 558A.08 for examples of explanatory paragraphs to use in each situation.) (Note: The
    auditor is required to apply certain procedures to RSI, one of which is to compare the
    information provided in RSI for consistency with the basic financial statements. (AU
    558A.07)

    a.   The RSI is omitted?

    b.   The measurement or presentation of the RSI departs materially from prescribed
         guidelines?

    c.   The auditor is unable to complete the prescribed limited procedures on the RSI?

    d.   The auditor is unable to remove substantial doubts about whether the RSI conforms to
         prescribed guidelines?


                                                               -15-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO       N/A     REF

28. If SAS 120 is early implemented: Is there an explanatory paragraph (following the opinion
    paragraph) in the auditor’s report on the financial statements to refer to the required
    supplementary information, with language to explain the following circumstances, as
    applicable?: (Note 1: SAS 120 is effective for audits of financial statements for periods
    beginning on or after 12/15/10 (FY2011)) (Note 2: The auditor is required to apply certain
    procedures to RSI, one of which is to compare the information provided in RSI for consistency
    with the basic financial statements. (AU 558.05)) See AU §558.08 & .09 & Exhibit A.3 for
    required elements of reporting for each of these circumstances.

    a.   The RSI is included, and the auditor has applied the procedures in AU §558.05 (i.e.,
         limited procedures)?

    b.   The RSI is omitted?

    c.   Some RSI is missing and some is presented in accordance with the prescribed guidelines?

    d.   The auditor has identified material departures from the prescribed guidelines.

    e.   The auditor is unable to complete the procedures in AU §558.05 (i.e., limited
         procedures)?

    f.   The auditor has unresolved doubts about whether the required supplementary information
         is presented in accordance with prescribed guidelines?

Supplemental Information (SI) Paragraph/Report
The auditor’s report concerning SI may be given in a paragraph of the auditor’s report on the financial statements or in a separate
report. (AU 551A.06; If SAS 119 early implemented, AU 551.09) (Note: GUIDE-GAS/A-133 recommends that the auditor report
on the Schedule of Expenditures of Federal Awards in the report on the financial statements as SI. (GUIDE-GAS/A-133 13.11 &
13.12) The GUIDE does not provide any examples of reporting on the federal schedule in a separate report. In certain
circumstances, the auditor’s report on the Schedule of Expenditures of Federal Awards may be incorporated into the A-133 Report
on Compliance and Internal Control. See GUIDE-GAS/A-133 13.24 & 13.56, Example 13-1, footnote 7.)

29. Pre-SAS 119: If there is SI that is not considered part of the basic financial statements, is it
    covered by an auditor’s report/paragraph on the SI, and does the report/paragraph contain the
    following: (AU 551A.04 – 551.06; GUIDE-SLG 14.79, Example A-1; GUIDE-GAS/A-133,
    4.51, Example 4-1)

    a.   A statement that the audit has been performed for the purpose of forming opinion(s) on
         the financial statements that collectively comprise the basic financial statements?

    b.   A description of the additional information accompanying the financial statements?
         (Note: Identification may be by descriptive title, or page number.)

    c.   A statement that the accompanying information is presented for purposes of additional
         analysis and is not a required part of the basic financial statements?

    d.   Either an opinion on whether the SI is fairly stated in all material respects in relation to
         the basic financial statements taken as a whole, or a disclaimer of opinion? (See report
         examples at AU 551A.12 & .13)

         (1) If there were modifications in the auditor’s standard report on the basic financial
             statements, did the auditor consider the effects of the modifications when reporting
             on the accompanying SI? (Note: If the report on the financial statements is
             qualified, the auditor should make clear the effects upon any accompanying SI as
             well. (See report example at AU 551A.14) If the opinion rendered on the financial
             statements is adverse or a disclaimer, the auditor should not express the opinion
             described in AU 551A.06 on the SI. ) (AU 551A.10 & GAS/A-133, 4.51, Example
             4-1, footnote 11)


                                                               -16-
DESK REVIEW – 2010

REVIEW ITEM                                                                                                YES   NO   N/A   REF

30. If SAS 119 is early implemented: If there is SI that is not considered part of the basic
    financial statements, is it covered by an auditor’s report/paragraph on the SI, and does the
    report/paragraph contain the following: (AU 551.09; GUIDE-SLG 14.79, Example A-1;
    GUIDE-GAS/A-133, 4.51, Example 4-1)
    (Note: SAS 119is effective for audits of financial statements for periods beginning on or after
    12/15/10 (FY2011))

    a.   A statement that the audit was conducted for the purpose of forming an opinion on the
         financial statements as a whole?

    b.   A statement that the SI is presented for purposes of additional analysis and is not a
         required part of the financial statements?

    c.   A statement that the SI is the responsibility of management and was derived from, and
         relates directly to, the underlying accounting and other records used to prepare the
         financial statements?

    d.   A statement that the SI has been subjected to the auditing procedures applied in the audit
         of the financial statements and certain additional procedures, including comparing and
         reconciling such information directly to the underlying accounting and other records used
         to prepare the financial statements or to the financial statements themselves and other
         additional procedures, in accordance with auditing standards generally accepted in the
         U.S. of A?

    e.   If an unqualified opinion is issued on the financial statements (and assuming that SI is
         fairly stated), a statement that, in the auditor’s opinion, the supplementary information is
         fairly stated ,in all material respects, in relation to the financial statements as a whole?
         (Note: If the auditor concludes, based on procedures performed, that the SI is materially
         misstated in relation to the financial statements as a whole, the auditor should propose
         appropriate revision of the SI to management. If management does not revise SI, the
         auditor should modify his/her opinion on the SI and describe the misstatement in the
         auditor’s report. (AU 551.13))

    f.   If a qualified opinion is issued on the financial statements and the qualification has an
         effect on the SI, a statement that, in the auditor’s opinion, except for the effects on the SI
         of (refer to the paragraph in the auditor’s report explaining the qualification), such
         information is fairly stated, in all material respects, in relation to the financial statements
         as a whole? (Note: When the auditor’s report on the financial statements contains an
         adverse opinion or a disclaimer of opinion, the auditor is precluded from expressing an
         opinion on the SI, and is required to disclaim an opinion on the SI. (AU 551.11))

Financial Statement Presentation

Special Purpose Governments (COD Sp 20)

31. If the special-purpose government is engaged in more than one governmental program or if it
    has both governmental and business-type activities, are both fund financial statements and
    government-wide financial statements presented? (COD Sp 20.104; GUIDE-SLG 12.05)
    (See illustrative government-wide statements at COD Sp 20.903 – Exhibits I-1 & I-2)

32. If the special-purpose government is engaged in a single governmental program, are the
    financial statements presented in one of the following ways? (COD Sp 20.105; GUIDE-SLG
    12.06)

    a.   Are the fund financial statements and government-wide statements combined, using a
         columnar format that reconciles individual line items of fund financial data to
         government-wide data in a separate column on the face of the financial statements rather
         than at the bottom of the statements or in an accompanying schedule?


                                                                -17-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO    N/A     REF

         (Note: Descriptions of the reconciling items should be presented either on the face of the
         financial statements, in an accompanying schedule, or in the notes to the financial
         statements? (COD Sp 20, footnote 6)) (See illustrative statements at COD Sp 20.902 –
         Exhibits A-4, B-6 & B-7)

                                                 OR
    b.   Are separate government-wide and fund financial statements presented, with the
         government-wide statement of activities presented using a different format, as described
         in Paragraph 136 of GASBS 34? (See illustrative government-wide statements at COD
         2200.911 or Sp 20.902 - Exhibit A-3 & COD 2200.914 or Sp 20.902 - Exhibit B-5)

33. If the special-purpose government is engaged in only business-type activities, are only the
    financial statements required for enterprise funds presented? (COD Sp 20.107 & Ho5.104)
    (Note 1: The basic financial statements and RSI should consist of (1) MD & A, (2) Statement
    of net assets or balance sheet, (3) Statement of revenues, expenses, and changes in fund net
    assets, (4) Statement of cash flows, (5) Notes, and (6) RSI other than MD & A, if applicable
    (COD Sp 20.107; GUIDE-SLG 12.07) (See illustrative statements at COD Sp 20.903 –
    Exhibits I-3 & I-4)) (Note 2: If the government reports multiple enterprise funds, a total
    column is required. GASB Q&A #7.97.1)

34. If the special-purpose government is engaged only in fiduciary activities, are only the
    financial statements required for fiduciary funds presented? (Note: The basic financial
    statements and RSI should consist of (1) MD & A, (2) Statement of fiduciary net assets, (3)
    Statement of changes in fiduciary net assets, (4) Notes, and (5) RSI other than MD & A, if
    applicable.) (COD Sp 20.108; GUIDE-SLG 12.08)

OCBOA Financial Statements
(Note: For an accounting basis to be OCBOA, it must have substantial support - - See the AICPA Practice Aid “Applying
OCBOA in State and Local Governmental Financial Statements” (OCBOA PA) for discussion and illustrations. That publication
identifies the most common OCBOA - cash, modified cash and regulatory basis, and defines the modified cash basis as “GAAP-
equivalent modifications to transactions that are initially derived from cash receipts or cash disbursements”. “Budgetary basis”
is not considered OCBOA unless it meets the definition of one of those three bases.)

35. If the financial statement presentation is OCBOA, is the basis of accounting either a cash
    receipts and disbursements basis OR a modification of the cash basis having substantial
    support (such as recording depreciation on capital assets)? (AU 623.04, GUIDE-SLG 15.01)
    (Note: Example in the OCBOA PA (pg 11): The recording of capital assets arising from
    cash transactions and depreciating the assets is appropriate to the modified cash basis, but
    not recording depreciation for those assets is not appropriate. Similarly, recording capital
    assets arising from cash transactions but not recording long-term debt arising from cash
    transactions associated with those capital assets is not appropriate.)

36. Does the OCBOA presentation follow substantially the same presentation that is required by
    GASB 34? (Note: MD&A, Government-wide & fund statements, and RSI should be
    reported, if applicable; a cash flow statement is not required. OCBOA notes should
    communicate the substance of GAAP note disclosures.) (AU 9623.93 & 94; GUIDE-SLG
    15.02 - .05 & footnote 2))

Government-Wide Financial Statements

37. Are individual funds or fund types not displayed in the government-wide statements? (COD
    2200.110)




                                                             -18-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

38. Are separate rows and columns used to distinguish between the governmental and business-
    type activities of the primary government? (COD 2200.113; GUIDE-SLG 2.12) (Note: The
    terms activity and fund are not synonymous, so that an activity reported in an enterprise fund
    may be reported as a governmental activity in the government-wide statements. If so, this
    reclassification would be explained in the reconciliations. (GASB Q&A #7.7.4 & #7.7.5))

39. Are fiduciary activities, including component units that are fiduciary in nature, not included in
    the government-wide statements? (Note: These should be reported only in the fund
    statements of fiduciary net assets and changes in fiduciary net assets.) (COD 2200.110 &
    .111; GUIDE-SLG 2.12)

40 If applicable, are discretely presented component units (other than those that are fiduciary in
   nature) reported in the government-wide statements? (COD 2600.107; GUIDE-SLG 2.12)
   (Note: If the reporting entity includes DPCU’s that aren’t included in the audited financial
   statements, there should be an opinion modification acknowledging that the financial
   statements do not include the data of the component units necessary for reporting in
   conformity with GAAP. (See checklist item #18, above))

41 Are separate rows and columns used to distinguish between the total primary government and
   its discretely presented component units, and is a total column presented for the primary
   government? (COD 2200.112; GUIDE-SLG 2.12) (Note: A total column for the entity as a
   whole may be presented but is not required. Also, prior-year data may be presented but is not
   required.)

42. Are the following government-wide statements included:
    a.   Statement of Net Assets? (COD 2200.105 & .110) (See illustrative statements in COD
         2200.911 - Exhibits A-1 & A-2)

         (1) Is this statement in a format that displays “assets less liabilities equal net assets”?
             (COD 2200.115; GUIDE-SLG 2.17) (Note: This format is encouraged although the
             traditional balance sheet format may be used.)

         (2) Is the term “net assets” used, rather than “fund balance” or “equity”? (COD
             2200.115)

         (3) Are net assets displayed in three components – (1)“invested in capital assets, net of
             related debt”, (2) “restricted” (distinguishing between major categories of
             restrictions), and (3) “unrestricted”? (COD 2200.117; GUIDE-SLG 2.17 & 10.05)
             Invested in capital assets, net of related debt consists of capital assets, including
             restricted capital assets, net of accumulated depreciation/amortization and reduced
             by outstanding balances of any debt attributable to the acquisition, construction or
             improvement of those assets. The portion of debt related to unspent proceeds should
             not be included here but, rather in the same net assets component as the unspent
             proceeds, e.g. restricted for capital projects. (COD 2200.118) If the government
             has capital assets with no related debt, the component should be titled “invested in
             capital assets” so as not to be misleading. GASB Q&A #7.23.7. Capital-related
             debt includes retainage & accounts payable attributable to construction. (Q&A
             #7.23.13 & .14)
             Restricted relates to net assets with constraints externally imposed by creditors,
             grantors, contributors, or other governments, or constraints imposed by law through
             the government’s own constitutional provisions or enabling legislation. (COD
             2200.119) The determination of whether resources should be classified as restricted
             in the GW statement of net assets begins at the fund level. The purpose should not be
             so broad that, in substance, it establishes no purpose restrictions narrower than the
             general restriction of the activity.” (GASB Q&A #7.24.4)




                                                              -19-
DESK REVIEW – 2010

REVIEW ITEM                                                                                               YES   NO   N/A   REF

          Unrestricted applies to net assets not meeting the definition of the other two
          categories. (COD 2200. 124)

          (a) If a landfill closure & post-closure liability is reported, is the liability included in
              the calculation of unrestricted net assets, OR if the liability is funded with
              restricted assets, does the liability reduce restricted net assets? (GASB Q&A
              #7.22.15)
              (Note 1: If the liability is funded, and the restricted asset is exactly equal to the
              liability, there will be no affect on any category of net assets (i.e., assets less
              liabilities = -0- net assets). If the liability is greater than the restricted asset, the
              liability should reduce unrestricted net assets, as discussed in (d) below.) If the
              asset held exceeds the amount required to be restricted, and is greater than the
              liability, the asset should increase unrestricted net assets (i.e., the asset is not
              considered to be a restricted asset). (Q&A #7.50.11))
              (Note 2: Closure & post-closure liabilities are not capital-related debt (GASB
              Q&A #7.22.15))

          (b) If permanent endowments or permanent fund principal amounts are included,
              are restricted net assets displayed in two additional components – expendable
              and nonexpendable? (COD 2200.123; GAAFR, pg. 163)

          (c) Are designations of net assets not reported in the statement of net assets? (COD
              2200.125; GUIDE-SLG 10.05) OR If GASBS 54 is early implemented, are
              commitments and assignments not reported in the statement of net assets? (COD
              2200.125; GASB Q&A #7.22.7)

          (d) Are restricted assets not reported as negative? (Note: If liabilities that relate to
              restricted assets exceed those assets, no restricted balance should be reported;
              the net negative amount should be reported as a reduction of unrestricted net
              assets.) (GUIDE-SLG 10.05, footnote 4; GAAFR pg. 163; GASB Q&A
              #7.24.13)

      (4) Are assets and liabilities presented in order of their relative liquidity, and are
          liabilities whose average maturities are greater than one year reported in two
          components – the amount due within one year and the amount due in more than one
          year? (COD 2200.116; GUIDE-SLG 2.18 & 8.108) (Note 1: This presentation is
          encouraged, although a classified statement, distinguishing between all current and
          long-term assets and liabilities, is also acceptable. For examples and discussions of
          the differences between the two methods see COD 2200.911, Exhibits A-1 & A-2 and
          GASB Q&A #7.22.2 & 7.22.3. Note 2: Compensated absences due within one year
          should be estimated, based on historical trends or budgeted amounts. (GASB Q&A
          #7.22.4) Note3: When an employee vests with regard to compensated absences
          benefits, the liability is not recorded in the governmental fund statements – the
          liability must mature (become due and payable) in order to record a fund liability.
          (GASB Q&A #Z.16.2))

      (5) Is this the only statement that reports general capital assets and general unmatured
          long-term liabilities? (COD 1400.101 & 1500.103; GUIDE-SLG 2.16) (Note 1:
          Capital assets and long-term liabilities of fiduciary funds are reported only in the
          statement of fiduciary net assets. (COD 1400.101 & 1500.102) (Note 2: All general
          capital assets, including general infrastructure assets, should be capitalized in this
          Statement. Exceptions are the retroactive provisions for Phase III government
          general infrastructure and intangible assets, infrastructure not meeting the “major”
          criteria, and works of art and historical treasures that meet certain conditions. Also,
          Phase I & II governments are not required to retroactively report (a) intangible
          assets considered to have indefinite useful lives as of the effective date of GASBS 51
          & (b) those that would be considered internally generated. GASBS 51 is effective for
          periods beginning after 6/15/2009(FY2010). (GUIDE-SLG 7.21 through 7.26))

                                                             -20-
DESK REVIEW – 2010

REVIEW ITEM                                                                                          YES   NO   N/A   REF

        (6) Are capital assets that are being, or have been, depreciated reported net of
            accumulated depreciation? (COD 1400.112; GUIDE-SLG 7.20) (Note 1:
            Accumulated depreciation may be reported on the face of the statement or disclosed
            in the notes.) (Note 2: GASBS 51 expanded the definition of depreciation in GASBS
            34 to include amortization of intangible assets. (GASBS 51, ¶5))

        (7) Are capital assets not being depreciated (i.e., land, construction in progress,
            intangible assets with indefinite useful lives) reported separately if the government
            has a significant amount of these assets? (COD 1400.112; GUIDE-SLG 7.20 &
            7.27; GASB Q&A #7.11.3)

        (8) Are amounts reported as interfund balances in the funds (including internal service
            fund balances) eliminated or reclassified appropriately, as follows? (COD 2200.145,
            .146 & .150; GASBS 34, para. 311 & 312; GUIDE-SLG 9.16)

            (a) Are amounts owed between funds in the governmental activities columns
                eliminated, and are amounts owed between funds in the business-type activities
                column eliminated?

            (b) Are amounts owed between governmental and business-type activities presented
                as internal balances, and are these internal balances ultimately eliminated in the
                “total primary government” column? (Note: This is done either by including
                both the receivable and payable on the same line as “internal balances” that
                offset each other in the aggregation process or by adjusting the amounts out of
                the “total primary government” column, accompanied by a notice of the
                elimination. (See Exhibit A-1 in COD 2200.911))

            (c) Are amounts of receivables and payables between the primary government and
                fiduciary funds reported as receivable from and payable to external parties,
                rather than as internal balances? (COD 1800.103 & 2200.146)

            (d) Are internal service fund balances that are not eliminated reported in the
                governmental activities column? (COD 2200.150) (Note: Although internal
                service funds are reported as proprietary funds, the activities accounted for in
                them are usually more governmental in nature. If, however, enterprise funds
                are the predominant or only participants in an internal service fund, the
                balances should be reported in the business-type activities column.)

        (9) Are intra-entity (between primary government and its DPCUs) receivables and
            payables reported on a separate line of the Statement? (COD 2200.149; GUIDE-
            SLG 3.16 & 9.21)

   b.   Statement of Activities? (COD 2200.105 & .110) (See illustrative statements in COD
        2200.914 – Exhibits B-1 through B-4)

        (1) Is this statement presented in a format that reports the net (expense) revenue (also
            known as net cost) of its individual functions? (COD 2200.126; GUIDE-SLG 2.20)
            (Note: an example of a format that meets these requirements is illustrated in COD
            2200.142.)

        (2) Does this statement present governmental activities by function, to coincide with the
            level of detail required in the governmental fund statement of revenues, expenditures
            and changes in fund balances, and does it present enterprise fund activities by
            different identifiable activities? (COD 2200.127; GUIDE-SLG 2.19 & 8.100)
            (Note: Greater detail is encouraged but not required. (COD 2200.128)) (See
            GASB Q&A #7.26.3 to #7.26.5 and footnote 19 at COD 2200.127 for discussion of
            identifiable activities.)


                                                            -21-
DESK REVIEW – 2010

REVIEW ITEM                                                                                          YES   NO   N/A   REF

      (3) If indirect expenses are allocated between functions, are direct and indirect expenses
          presented in separate columns? (COD 2200.130; GASBS 34, para. 357; GUIDE-
          SLG 8.100; GASB Q&A #7.28.4 & 7.28.5) (Note: A column totaling direct and
          indirect expenses may be presented but is not required.)

      (4) If a separate line is used to report unallocated depreciation expense, does it clearly
          indicate** that it excludes direct depreciation expenses of the various programs?
          (COD 2200.132; GASB para. 363; GUIDE-SLG 7.29) (Note: Depreciation expense
          for capital assets that can be identified with a functional category should be included
          in direct expenses of that function, but depreciation expense for capital assets that
          essentially serve all functions is not required to be allocated to functions.
          Unallocated expense may be reported on a separate line, or as part of the general
          government function. Depreciation for infrastructure assets should not be allocated
          to the direct expenses of the various functions, but should instead be reported either
          as a direct expense of the function that is normally associated with infrastructure
          assets (i.e., public works or transportation) or on a separate line-item. (GASBS 34,
          para. 361; GUIDE-SLG 7.296 & 7.30))
          ** (Note: See GASB Q&A #7.29.4 for examples of how to clearly indicate this.
          “Unallocated Depreciation” is acceptable.)

      (5) If a portion of interest expense is reported as a direct expense in a functional expense
          category, is the indirect interest expense reported on a separate line that clearly
          indicates that it excludes direct interest expenses reported in other functions? (COD
          2200.134; GASB Q&A #7.30.4; GUIDE-SLG 8.101) (Note 1: Interest expense on
          general long-term debt normally should not be included in direct expenses, although
          in some cases, excluding interest from direct expenses could be misleading (See
          GASB Q&A #7.30.1 to 7.30.3). The amount of interest expense not included in the
          separate line-item should either be disclosed in the notes or on the face of the
          statement. (GASBS 34, para. 364 – 366)) (Note 2: This provision does not apply to
          interest expense of business-type activities or to DPCU’s. (GASB Q&A #7.30.5)

      (6) Does the statement separately report three categories of program revenues: (1)
          charges for services, (2) program-specific operating grants and contributions, and (3)
          program-specific capital grants and contributions? (COD 2200.136) (Note 1: Taxes
          of all types (paid by the reporting government’s taxpayers) are always considered
          general revenues rather than program revenues. (COD 2200.135 & .140 & GASBS
          34, para. 375)) (Note 2: More than one column may be used to display components
          of program revenue. Also the column headings may be more descriptive. (COD
          2200.136, footnote 21))

      (7) Are general revenues reported after total net expense of the government’s functions?
          (COD 2200.140)

      (8) Are contributions to term and permanent endowments, contributions to permanent
          fund principal, special and extraordinary items, and transfers between governmental
          and business-type activities reported at the bottom of the statement (separately from,
          but in the same manner as, general revenues) to arrive at the all-inclusive change in
          net assets for the period? (COD 2200.141) (See COD 2200.143 & .144, GUIDE-
          SLG 6.71 & 8.102; & GASB Q&A #7.43.3 for definitions and examples of special
          and extraordinary items.)




                                                           -22-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

         (9) Are impairment losses and insurance recoveries reported in the Statement of
             Activities appropriately? (Note: An impairment loss is reported as a program
             expense or special or extraordinary item. Restoration/replacement of an impaired
             asset is reported separately from the impairment loss & associated insurance
             recovery. The impairment loss is reported net of the insurance recovery when both
             occur in the same year, but is reported as program revenue or an extraordinary item
             if recovery in subsequent years. (COD 1400.173 & .177))

         (10) Interfund Activity: Are amounts reported as interfund activity in the funds
              (including internal service fund and similar expense allocation activity) eliminated or
              reclassified appropriately, as follows? (COD 2200.145 & .147 - .149; GASBS 34,
              para. 314 – 316; GUIDE-SLG 9.18 & 9.19)

             (a) Are interfund transfers within governmental activities and within business-type
                 activities eliminated and not presented in the Statement, and is only the net
                 amount transferred between governmental and business-type activities reported
                 in the Statement, but ultimately eliminated in the “total primary government”
                 column on a single “transfers” line-item? (GASB Q&A #7.47.16)

             (b) Is the doubling-up effect of internal service fund activity eliminated, i.e., is net
                 income of an internal service fund reported as a reduction in amounts charged to
                 participating funds/functions, and is net loss reported as an increase? (See
                 GASB Q&A #7.47.6 & Appendix 7-3, Exercise #4)

             (c) Are amounts relating to interfund services provided and used between functions
                 (e.g. sale of water from a utility to the general government) not eliminated?

             (d) Are internal events that are in effect allocations of overhead expenses between
                 and within functions eliminated so the allocated expenses are only reported by
                 the function to which they were allocated? (See GASB Q&A #7.47.1 to #7.47.4
                 & #7.47.13)

         (11) Intra-Entity Activity: Are intra-entity (between primary government and its
              DPCUs) activities reported as external transactions –as revenues and expenses?
              (COD 2200.149; GASBS 34, para. 317 & 318; GUIDE-SLG 3.16 & 9.21) (Note:
              See COD S20.112 & GUIDE-SLG 9.21 – 9.25 (GASBS 48) for further discussion of
              intra-entity transfer of capital and financial assets – the transferee should recognize
              the asset at the carrying value of the transferor.)

         (12) Is the cumulative effect of a change in accounting principle or in the application of
              an accounting principle (includes a change in the financial reporting entity), and the
              correction of an error reported as a restatement of beginning net assets? (GAAFR pg
              170; GASB Q&A #7.22.16; GUIDE-SLG 2.15; APB 20 & 9; GASBS 34, fn 13 &
              para. 309) (Note: A change in capitalization threshold is not a change in
              accounting principle that requires restatement. (GASB Q&A #7.22.17))

Fund Financial Statements

43. The governmental and proprietary fund financial statements:(COD 2200.152, .156, .159, &
    .165; GASB Q&A #7.55.2; GUIDE-SLG 2.29, 2.32, & 2.36)

    a.   Is the financial information of each major fund presented in a separate column, and are
         nonmajor governmental and nonmajor enterprise funds aggregated and displayed in
         single columns?

    b.   Is there a separate total column for all governmental funds and for all enterprise funds?

                                                              -23-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

    c.   Is there a combined total column for all internal service funds, if any?

    d.   Is the main operating fund (the general fund or its equivalent) reported as a major fund?
         (COD 2200.153; GUIDE-SLG 2.30)

    e.   Does the entity report only one general fund? (COD 1300.116)

    f.   If the reviewer has access to the audited entity’s annual financial report, does it appear
         that all funds qualifying as major funds are reported as such? (Note: Major funds are
         determined based on criteria in COD 2200.153. A fund that does not meet the major
         fund criteria may be reported as major, if government officials believe it is particularly
         important, or for consistency with prior years’ reporting. (GASB Q&A #7.55.3))
                   Governmental                   Enterprise                        Total
                        10%                          10%                            5%
    Assets
    Liabilities
    Revs
    Exps

    g.   For school districts that consist of both elementary and high school districts, and if the
         reviewer has access to the Trustees’ Financial Summary: Have the general funds of the
         elementary and high school districts been combined, and do other major funds represent
         only an elementary or high school district fund (i.e., not combined)? (Note: For
         consistency in reporting, OPI has made this recommendation for major program
         determination. Because State law (MCA 20-9-201) gives OPI authority over school
         financial administration, we will consider the recommendation to be authoritative. See:
         http://www.opi.mt.gov/SchoolFinance/index.html (Select “Accounting” from menu on
         left, then the “GASB34” tab, then “Major Fund Determination” (under the “FAQ by
         OPI” heading).) (SAC, para. 8.c.)

    h.   Are internal service funds not reported as major funds? (COD 2200.152, footnote 26;
         GASBS 34, para. 385) (Note: The combined totals for all internal service funds should
         be reported in a separate column in the proprietary fund financial statements, to the right
         of the total enterprise funds column. (GASB Q&A #7.55.4))

44. Are fiduciary funds not reported separately as major funds? (GASBS 34, para. 384, Q&A
    #7.55.5) (Note: COD 2200.175 requires a separate column to be presented for each
    fiduciary fund type (pension trust, investment trust, private-purpose trust, and agency).)

45. If the government wishes to present combining statements for nonmajor funds, are they not
    presented in the basic financial statements, but instead reported as supplementary
    information? (COD 2200.152, footnote 27)

46. Do the funds reported conform to those described in COD 1300.103 - .114? (GUIDE-SLG
    2.26)
    (Note 1: Governmental funds include the general, special revenue, capital projects, debt
    service, and permanent funds. (See also GASBS 54 (COD 1300.104 - .108) – effective for
    periods beginning after 6/15/2010 (FY2011) – clarifies definitions of governmental fund
    types. If GASB 54 is early-implemented: in order to satisfy the criteria for reporting as a
    special revenue fund, restricted or committed revenues should comprise a substantial
    portion of the inflows of the fund. Inflows would include transfers or assigned revenues in
    addition to restricted or committed revenues. (GASB Q&A #Z.54.32))



                                                               -24-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

    (Note 2: Proprietary funds include enterprise and internal service funds. Enterprise funds
    may be used to report any activity for which a fee is charged to external users for goods or
    services. Activities are required to be reported as enterprise funds (unless insignificant) if
    any one of the criteria listed in COD 1300.109 is met (i.e., if activity is financed with debt
    secured solely by a pledge of the net revenues from fees and charges; if laws/regulations
    require that the activity’s costs of providing services, including capital costs, be recovered
    with fees and charges, or if pricing policies establishes fees and charges designed to cover its
    costs.) (GUIDE-SLG 2.27) Governmental entities that have previously used the AICPA Not-
    for-Profit models but that don’t meet the above criteria may use enterprise fund accounting.
    (COD Sp 20.111; GASBS 34, para. 459))
    (Note 3: Fiduciary funds include pension trust, investment trust, private-purpose trust, and
    agency funds. Fiduciary funds should be used to report assets that cannot be used to
    support the government’s own programs. In this context, the term “government” refers to
    the financial reporting entity, including component units. (GASB Q&A #7.52.6))

47. Are the following fund financial statements, as applicable, included:

    a.   Balance Sheet – Governmental Funds? (COD 2200.155) (See illustrative statement at
         COD 2200.915 – Exhibit C-1)

         (1) Pre GASBS 54: Is equity in this Statement labeled “fund balances”, and are fund
             balances segregated into reserved and unreserved amounts? (2009-2010 COD
             2200.157; GUIDE-SLG 2.32, 10.09 & 10.10) (Note 1: Reserves arise when fund
             balances are either legally segregated for a specific, future use (e.g. encumbrances),
             or when fund balances are not appropriable for expenditure (e.g., inventories,
             prepaid items, noncurrent receivables not offset by deferred revenue, and the
             noncurrent portion of interfund receivables)). (Note 2: Fund balances would not be
             reported as reserved if the legally segregated resources are reported in a separate
             fund used only for that purpose. The use of the separate fund itself communicates
             the legal segregation. (GUIDE-SLG 10.12; GASB Q&A #7.63.1 & #7.63.2))

         (2). If GASBS 54 is early implemented: Is equity in this Statement labeled “fund
              balances” and are fund balances classified in the following, as applicable?: (COD
              1800.142 - .164; GUIDE-SLG, 10.31) (Note 1: GASBS 54 is effective for periods
              beginning after 6/15/2010 (FY2011), with early implementation encouraged.)
             a.   Nonspendable? (Amounts that cannot be spent because (1) not in spendable
                  form (e.g., inventories, prepaids, long-term loans/notes receivable, property
                  acquired for resale) or (2) legally or contractually required to be maintained
                  intact (e.g., corpus of a permanent fund). The amounts for the 2 components
                  should either be separately displayed on the face of the statement or separately
                  disclosed in the notes. (See GASB Q&A #Z.54.6 for display.)) However, if the
                  proceeds from L/T receivables or property acquired for resale are restricted,
                  committed, or assigned, those amounts should be classified as restricted,
                  committed, or assigned instead.)
                  (Note 1: Interfund loans receivable reported in the general fund only will be
                  classified as nonspendable – in other funds, they are by definition either
                  restricted, committed, or assigned. (GASB Q&A #Z.54.4))
                  (Note 2: The principal amount of a permanent fund is classified as
                  nonspendable fund balance in the governmental fund statements but is classified
                  as restricted net assets in the government-wide statement of net assets. (COD
                  1800.144; GASB Q&A #Z.54.10))




                                                             -25-
DESK REVIEW – 2010

REVIEW ITEM                                                                                        YES   NO   N/A   REF

          b.   Restricted (When use of resources is constrained either by (a) external
               impositions by creditors, grantors, contributor, or laws or regulations of other
               governments or (b) impositions by law through constitutional provisions or
               enabling legislation.) (Note: When a restricted source, such as a grant,
               requires a government match, the match would also be classified as restricted.
               (GASB Q&A #Z.54.8))
          c.   Committed (Amounts that can only be used for specific purposes pursuant to
               constraints imposed by formal action of the government’s highest level of
               decision-making authority; same high level must be used to remove or change
               the specified used.) (Note: Existing resources used to satisfy contractual
               requirements s/b classified as committed. (GASB Q&A Z.54.11))
          d.   Assigned (Amounts constrained by government’s intent to be used for specific
               purposes – intent to be expressed by the governing body itself or a a body (e.g.,
               committee) or official to which the governing body has delegated the authority
               to assign amounts.) Includes (a) all remaining positive balances reported in
               governmental funds, other than general fund, that are not classified as
               nonspendable, restricted, or committed, and (b) amounts in general fund
               intended to be used for a specific purpose. Assigned fund balance in the general
               fund represents a specific purpose narrower than the general purposes of the
               government itself. Assigned fund balances should not be reported if such
               assignment results in a deficit in unassigned fund balance.)
          e.   Unassigned (Residual classification for the general fund.) The general fund
               should be the only fund that reports a positive unassigned fund balance amount.
               It may be necessary to report a negative unassigned fund balance in other
               governmental funds, if expenditures incurred for specific purposes exceeded the
               amounts restricted, committed, or assigned to those purposes.))
          See COD 1800.901 (GASBS 54, ¶137) for recommended display of fund balance
          classifications – both in detail (Exhibit 1) and in the aggregate (Exhibit 2). For
          the aggregate presentation (Exhibit 2), further detail is required to be presented
          in the notes. (GASB 1800.159 & .162; 2200.157)

      (3) Are assets, liabilities and fund balances displayed in a balance sheet format (assets
          equal liabilities plus fund balances)? (COD 2200.156; GUIDE-SLG 2.29) (Note:
          The net asset format is not an alternative.)

      (4) Are general capital assets and general long-term debt not reported in this statement,
          but instead reported only in the governmental activities column in the government-
          wide statement of net assets? (COD 1400.114 & 1500.103; GUIDE-SLG 7.28)
          (Note: The matured portion (i.e., the amount that has come due for payment) of
          general long-term debt should be reported in the fund statements. (COD 1500.107 -
          .112))

      (5) Pre GASBS 54: Are reserved fund balances of the combined nonmajor funds
          displayed in sufficient detail to disclose the purposes of the reservations? (2009-
          2010 COD 2200.157; GUIDE-SLG 10.10)

      (6) Pre GASBS 54: Are unreserved fund balances of the combined nonmajor funds
          displayed by fund type on the balance sheet? (COD 2009-2010 2200.157; GUIDE-
          SLG 10.16)

      (7) Pre GASBS 54: If the government has established fund balance designations, are
          they reported as part of unreserved fund balances, and displayed separately on the
          balance sheet (or disclosed in the notes), and are the remaining unreserved fund
          balances reported as undesignated? (GUIDE-SLG 10.17 & 2009-2010 COD
          1800.144) (Note: Designations should not result in reporting negative
          undesignated balances.))


                                                           -26-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

        (8) If GASB 54 is early implemented: Are encumbrances NOT displayed on the
            financial statements? (Note: Encumbered amounts should already be included in the
            restricted, committed, and assigned fund balance classifications.) (GASB Q&A
            #Z.54.27 & .28))

        (9) If GASB 54 is early implemented: Are there no negative balances reported in the
            restricted, committed, or assigned fund balance classifications in any fund? (COD
            1800.156)

        (10) If GASB 54 is early implemented: If nonspendable, restricted, committed, and
             assigned fund balance classifications are presented in the financial statements in the
             aggregate: (COD 1800.159 & .162)

            (a) Are amounts for the two nonspendable components disclosed?

            (b) Are major specific purposes for the restricted, committed and assigned
                classifications disclosed?

        (11) Reconcilement: Is there a summary reconciliation at the bottom of the balance sheet
             (or in an accompanying schedule immediately following the statement) to reconcile
             total governmental fund balances to net assets of governmental activities in the
             government-wide statement of net assets?? (COD 2200.154 & .158; GUIDE-SLG
             10.19 & 10.20) (Note: If aggregated information in the reconciliations obscures
             individual elements of a reconciling item, a more detailed explanation should be
             provided in the notes.) See GASB Q&A Appendix 7-1 for example of a
             reconciliation & notes for a city (Exhibits 3 & 11 (Note 4)) & a school district
             (Exhibit 24). Appendix 7-3, Exercise #6 has a discussion on reconcilements.

   b.   Statement of Revenues, Expenditures and Changes in Fund Balances –
        Governmental Funds? (COD 2200.155) (See illustrative statements at COD 2200.915
        – Exhibits C-2 & C-3)

        (1) Is this statement presented in the format and sequence as set forth in COD 2200.159?
            (The following, as applicable, should be included: (1) Revenues (detailed) (2)
            Expenditures (detailed) (3) Excess (deficiency) of revenues over expenditures (4)
            Other financing sources and uses, including transfers (detailed) (5) Special and
            extraordinary items (detailed)(See COD 2200.162) (6) Net change in fund balances
            (7) Fund balances – beginning of period and (8) Fund balances – end of period.)
            (GUIDE-SLG 2.33) (Note: Special items are significant items that are either
            unusual or infrequent and within the control of management – e.g., sale of
            significant capital assets, etc; whereas extraordinary items are both unusual and
            infrequent and are not required to be within the control of management. (COD
            2200.143 & .144; GASB Q&A #7.43.2 & #7.43.3))

        (2) Are revenues classified by major revenue source, and are expenditures classified at a
            minimum by function? (COD 2200.160, 1800.117 & .120) (Note: Expenditures
            should also be classified by character – i.e., current, capital outlays, debt service, &
            intergovernmental). (GUIDE-SLG 8.103))

        (3) Are the face amounts (not proceeds of) long-term debt, issuance premiums or
            discounts, certain payments to escrow agents for bond refundings, interfund
            transfers, sales of capital assets (unless the sale meets the criteria of a special item),
            and insurance recoveries (unless the recovery meets the criteria of an extraordinary
            item) reported as other financing sources/uses? (COD 2200.161, 1400.177, &
            D20.106; GASB Q&A #7.66.1) (Note 1: All transfers should be reported as other
            financing sources and uses. A distinction is no longer made between operating
            transfers and residual equity transfers. (GASBS 34, para. 420)) (Note 2:
            Restoration or replacement of an impaired capital asset should be reported
            separately from the associated insurance recovery. (COD 1400.177))

                                                               -27-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

        (4) Do beginning and ending fund balances consist of both reserved and unreserved
            amounts [OR if GASBS 54 implemented, of the nonexpendable, restricted,
            committed, assigned, and unassigned classifications]? (COD 2200.159, footnote 29)

        (5) Is there a summary reconciliation at the bottom of the statement (or in an
            accompanying schedule immediately following the statement) to reconcile the total
            change in governmental fund balances to the change in net assets of governmental
            activities in the government-wide statement of activities?? (COD 2200.154 & .163;
            GUIDE-SLG 10.19 & 10.20) (Note 1: If aggregated information in the
            reconciliations obscures the nature of individual elements of a particular reconciling
            item, a more detailed explanation should be provided in the notes.) (Note 2: If a
            government moves a general capital asset to a proprietary fund, the entry is one-
            sided (in the proprietary fund only, reported as a capital contribution), but would
            affect both sides of the government-wide statements (reported as a transfer), and
            therefore would be reported as a reconciling item. (GUIDE-SLG 7.60 & .61; GASB
            Q&A #7.74.4))
            See GASB Q&A Appendix 7-1 for example of a reconciliation & notes for a city,
            (Exhibits 5 & 11(Note 5)) and a school district (Exhibit 26). Appendix 7-3, Exercise
            #6 has a discussion on reconcilements.

   c.   Budgetary Comparison Statements – Governmental Funds – If the government elects
        to report the required budgetary comparison information in the basic financial statements,
        rather than as RSI, have these statements been presented with the fund financial
        statements and after the Statement of Revenues, Expenditures, and Changes in Fund
        Balances? (GASBS Q&A #7.91.8 & COD 2400) (See checklist item #72 for required
        reporting of this statement.) (Note: If the entity has perspective differences (i.e., fund,
        organizational, or program structure differences), it must present budgetary comparisons
        as RSI. (COD 2400.102, footnote 1))

        (1) If included in the basic financial statements, do the budgetary comparison statements
            include only those funds for which budgetary comparison information is required as
            RSI (i.e., the general fund and major special revenue funds with legally adopted
            annual budgets)? (GUIDE-SLG 11.13)

   d.   Statement of Net Assets (or Balance Sheet) – Proprietary Funds? (COD 2200.164)
        (Note: Either a net assets format – assets less liabilities equal net assets – or a balance
        sheet format – assets equal liabilities plus net assets – may be used. (COD 2200.167;
        GUIDE-SLG 2.36)) (See illustrative statements at COD 2200.918 – Exhibits D-1 & D-2)

        (1) Are assets and liabilities presented in a classified format to distinguish between
            current and long-term (non-current)? (COD 2200.166; GUIDE-SLG 2.36 & 8.108)

        (2) Are net assets displayed in three components – “invested in capital assets, net of
            related debt”, “restricted” (distinguishing between major categories of restrictions),
            and “unrestricted”? (See checklist item #42.a.(3) for descriptions of these 3
            components.) (COD 2200.167; GUIDE-SLG 2.36) (Note: The difference between
            assets and liabilities may be labeled either fund net assets or fund equity. (GUIDE-
            SLG 2.66-Appendix A & 10.08.))

        (3) Are equity balances resulting from capital contributions and designations of net
            assets not displayed as such in this Statement? (COD 2200.167; GUIDE-SLG 10.08)




                                                            -28-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

        (4) If applicable, is there a summary reconciliation at the bottom of the statement (or in
            an accompanying schedule) to reconcile the total proprietary fund net assets to the
            net assets of business-type activities in the government-wide statement of net assets?
            (COD 2200.154 & .173) (Note: Generally, there will be no differences, although
            there may be, such as when the reclassification of internal service funds affects
            enterprise funds or when indirect costs are allocated from governmental to business-
            type activities. (GUIDE-SLG 10.21; GASB Q&A #7.75.1))

   e.   Statement of Revenues, Expenses, and Changes in Fund Net Assets (or Fund
        Equity) – Proprietary Funds? (COD 2200.164) (See illustrative statement at COD
        2200.918 – Exhibit D-3)

        (1) Is this statement presented in the all-inclusive format and sequence as set forth in
            COD 2200.169 & .170? (GUIDE-SLG 2.37) (The following, as applicable, should
            be included: (1)Operating revenues (detailed) (2)Total operating revenues
            (3)Operating expenses (detailed) (4)Total operating expenses (5)Operating income
            (loss) (6)Nonoperating revenues and expenses (detailed) (7)Income before other
            revenues, expenses, gains, losses, and transfers (8)Capital contributions (grant,
            developer, and other), additions to permanent and term endowments, special and
            extraordinary items (detailed), and transfers (9)Increase (decrease) in net assets
            (10)Net assets – beginning of period and (11)Net assets – end of period.) (Note:
            The required detail for operating and nonoperating expenses may be provided by
            using natural classifications or functions. (GASB Q&A #7.72.4; GUIDE-SLG
            8.105))

        (2) Are revenues reported by major source? (COD 2200.169; GUIDE-SLG 6.76)

        (3) Are operating revenues and expenses reported in this Statement similar to the cash
            flows from operations as reported in the Statement of Cash Flows? (Note: As a
            general guide only, transactions for which cash flows are reported as capital and
            related financing, noncapital financing, or investing activities normally would not be
            reported as components of operating income. If, however, the nature of an
            enterprise is such that its “operating activities” would fall under a financing or
            investing cash flows category, the revenues and expenses may be considered
            “operating”. ) (COD 2200.171; GASB Q&A #7.73.1)

            (a) If not, do the revenues and expenses reported as operating constitute the
                proprietary fund’s principal ongoing operations, and does their presentation
                agree to the definition of operating revenues and expenses disclosed in the
                notes? (COD 2200.171, footnote 33; GASBS 34, para 436) (Note: interest
                income is generally reported as nonoperating revenue, although it may be
                classified as operating if it meets the definition of operating revenue appropriate
                to the nature of the activity. (GUIDE-SLG 5.38))

        (4) Are capital contributions reported as a separate item after nonoperating revenues and
            expenses, rather than as direct additions to a contributed capital equity account?
            (COD 2200.172 & .170; GASBS 34, para. 437) (Note: If a government moves a
            general capital asset to a proprietary fund, the movement is reported only in the
            proprietary fund as a capital contribution. The transaction is not considered to be an
            “interfund” transaction - the governmental fund would not report the event because
            there is no flow of current financial resources. In the statement of activities, both
            sides of the transaction would be reported as a transfer, requiring a reconciling item
            in the governmental funds’ reconciliation. (GUIDE-SLG 7.61; GASB Q&A
            #7.74.4))




                                                            -29-
DESK REVIEW – 2010

REVIEW ITEM                                                                                          YES   NO   N/A   REF

        (5) Are impairment losses and insurance recoveries reported appropriately? (COD
            1400.173 & 177) (Note 1: If not considered temporary, an impairment loss should
            be reported as an operating expense, special item or extraordinary item in
            accordance with GASB 34. Restoration or replacement of an impaired capital asses
            should be reported separately from the impairment loss and associated insurance
            recovery. The impairment loss should be reported net of the associated insurance
            recovery when both occur in the same year. Insurance recoveries in subsequent
            years should be reported as nonoperating revenue or an extraordinary item.) (Note
            2: If the insurance recovery is greater than the impairment loss, the net gain should
            be reported as a special or extraordinary item (if the impairment qualifies as such),
            and should be reported as a program revenue (charges for services classification) or
            operating revenue, (if the impairment loss absent any insurance recovery would be
            considered a program or operating expense). The net gain should not be reported as
            a negative expense. (Q&A #Z.42.14))

        (6) If applicable, is there a summary reconciliation at the bottom of the statement (or in
            an accompanying schedule) to reconcile the total change in proprietary fund net
            assets to the change in net assets of business-type activities in the government-wide
            statement of activities? (COD 2200.154 & .173) (Note: Generally, there will be no
            differences, although there may be, such as when the reclassification of internal
            service funds affects enterprise funds, or when indirect costs are allocated from
            governmental to business-type activities. (GUIDE-SLG 10.21; GASB Q&A #7.75.1))

   f.   Statement of Cash Flows – Proprietary Funds? (COD 2200.164) (See illustrative
        statement at COD 2200.918 – Exhibit D-4)

        (1) Is the direct method of presenting cash flows used? (COD 2200.174 & 2450.128;
            GUIDE-SLG 2.38)

        (2) Does the cash flow statement presentation follow the provisions of GASB #9, rather
            than FASB #95) (COD 2450; COD P80.102; & GASB Q&A #2.2.1)

            (a) Are cash receipts and payments classified as resulting from operating,
                noncapital financing, capital and related financing, or investing activities?
                (COD 2450.112 - .126)

            (b) At a minimum, are the classifications of operating cash receipts and payments at
                COD 2450.128 reported, if applicable?

            (c) Is there a reconciliation of operating income to operating cash flows? (COD
                2450.129)

        (3) Are non-cash items affecting assets or liabilities included in a schedule which is
            separate from the cash flow statement? (COD 2450.132 & GASB Q&A 2.32.2)
            (Note: To be reported here, the non-cash transactions must meet two criteria – the
            transaction affects recognized assets or liabilities and, had it involved cash, the
            transaction would not properly have been classified as a cash flow from operating
            activities. These items are commonly known as “balance-sheet transactions”.
            (GAAFR, pg. 191; Q&A 2.32.1))

        (4) Are changes in fair value of investments and cash equivalents reported on the cash
            flow statement appropriately? (Note: Only the changes in fair value of investments
            classified as cash equivalents would be reported in the body of the cash flow
            statement. The change in fair value of investments not classified as cash equivalents
            would be reported as a non-cash transaction in the schedule discussed above.)
            (GAAFR, pg. 191))


                                                            -30-
DESK REVIEW – 2010

REVIEW ITEM                                                                                          YES   NO   N/A   REF

        (5) Are prior period adjustments affecting cash not reported as a current-period cash
            flow, but instead reflected as a restatement of the opening balance of cash and cash
            equivalents? (GAAFR, pg. 191))

        (6) Are the figures reported as beginning and ending cash and cash equivalents easily
            traceable to similarly titled line items on the respective balance sheets? (COD
            2450.105; GUIDE-SLG 5.35; GAAFR, pg. 192) (Note 1: If cash and investments
            are reported in a single line on the balance sheet, there must be a reconciliation of
            cash and cash equivalents per the statement of cash flows to the balance sheet in the
            statement of cash flows. (GASB Q&A #2.31.1 & 2.31.2)) (Note 2: Terms such as
            “cash” or “cash and cash equivalents” should be used here, rather than the term
            “funds”. (COD 2450.105))

        (7) Are changes in the entity’s policy for determining which items are treated as cash
            equivalents reported by restating prior-year financial statements? (COD 2450.108)

   g.   Statement of Fiduciary Net Assets – Fiduciary Funds? (COD 2200.175)
        (See illustrative statement at COD 2200.919 – Exhibit E-1)
        (Note 1: Net assets are not required to be presented in the three components of “invested
        in capital assets, net of related debt”; “restricted”; and “unrestricted”. However,
        GASBS 25, 26, 31& 43 require net assets to be labeled to indicate the purpose for which
        they are held. (GUIDE-SLG 2.40 & 10.22))
        (Note 2: It is presumed that all County audit reports will include an investment trust
        fund, due to the materiality of school district funds that are required to be held by the
        County Treasurer.)

        (1) Is a net assets format used (assets less liabilities equal net assets)? (Note: Using a
            balance sheet format is not an alternative.) (GUIDE-SLG 2.39)

        (2) Is there a separate column for each fund type – pension (and other employee benefit)
            trust funds, investment trust funds, private-purpose trusts, agency funds? (COD
            2200.175; GUIDE-SLG 2.39) (Note 1: The fiduciary fund financial statements
            should aggregate & display fiduciary funds by fund type.) ( Note 2: Display
            requirements of GASBS 25 & 26 apply to pension and other employee benefit trust
            funds, and display requirements of GASBS 31 apply to investment trust funds. (COD
            2200.176; GASB Q&A# 7.77.3)) (Note 3: COD I50.119 & footnote 12, indicate that
            individual investment accounts (I.I.A.s) should be reported separately from pools. If
            the entity maintains more than one pool (or I.I.A.), the pools and I.I.A.s may be
            combined in the basic financial statements but should be reported separately in SI
            combining statements. (GUIDE-SLG 12.70))

        (3) Are clearing account balances pertaining to other funds of the primary government
            not reported in agency funds? (COD 2200.179; GASBS 34, para. 395 & 443)
            (Note: Assets held for the government itself should no longer be reported in
            fiduciary funds, but rather in governmental or proprietary funds, as appropriate.
            This provision does not apply to liabilities, such as in a payroll clearing fund. The
            unremitted balances of payroll deductions in an agency fund do not need to be
            reclassified back to the operating funds. (GASB Q&A #7.81.1 & 7.81.2)

        (4) Is cash in the payroll and claims revolving agency funds reported net of warrants
            payable? (Note: The issuance of warrants, rather than the subsequent acceptance
            by the treasurer of the warrants, effectively reduces cash.) (GASB Q&A #2.13.4)

   h.   Statement of Changes in Fiduciary Net Assets – Fiduciary Funds? (COD 2200.175)
        (See illustrative statement at COD 2200.919 – Exhibit E-2)



                                                             -31-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

         (1) Is there a separate column for each fund type except agency funds – pension (and
             other employee benefit) trust funds, investment trust funds, private-purpose trusts,?
             (COD 2200.175 & .178) (Note 1: Display requirements of GASBS 25 & 26 apply to
             pension and other employee benefit trust funds, and display requirements of GASBS
             31 apply to investment trust funds. (COD 2200.176 & .177) Note 2: In a CAFR, a
             “combining statement of changes in assets and liabilities – all agency funds” should
             be presented as SI. (GUIDE-SLG 6.82))

         (2) Are resource inflows classified as additions and are resource outflows classified as
             deductions? (COD 2200.177; GUIDE-SLG 6.81 & 8.106)

48. If applicable, do the fiduciary fund financial statements include component units that are
    fiduciary in nature? (COD 2200.110(b) & .175) (Note: Each fiduciary component unit
    should be reported within the appropriate fiduciary fund types, rather than aggregated in a
    separate fiduciary component unit column. (GASB Q&A #7.77.4; GUIDE-SLG 2.39)

49. Interfund Activity reported in fund statements (COD 1800.102; GUIDE-SLG 9.07, Table 9-1;
    GASBS 34, para. 409 – 411):

    a.   Are interfund loans, that are required to be paid (and expected to be paid in a reasonable
         time), reported as interfund receivables in lender funds and interfund payables in
         borrower funds? (GUIDE-SLG 9.08) (Note 1: If an amount is not expected to be repaid
         within a reasonable time, the interfund balance should be reclassified as a transfer.
         (GUIDE-SLG 9.08 & 9.33; GASB Q&A #7.82.1)) (Note 2: Interfund loan balances are
         no longer required to be reported in two categories – “due to/from” and “advances
         to/from”, although they may be classified. It is still required, however, that there be a
         reservation of fund balance in governmental funds for the noncurrent portion of interfund
         receivables. If GASBS 54 is early implemented, the noncurrent portion of interfund
         receivables would re reported as nonspendable fund balance, to the extent that the
         proceeds from the collection of those receivables are not restricted, committed, or
         assigned. (GASB Q&A #7.62.2))

         (1) If a fund has overdrawn its share of an internal investment pool, has that fund
             reported an interfund liability to the fund that is deemed to have lent the amount to
             the overdrawn fund, and has the lending fund reported an interfund receivable (i.e,
             negative cash balances should not be reported)? (GUIDE-SLG 5.30)
             (Note 1: These interfund accounts should be eliminated in the government-wide
             statements, as required for internal balances.)
             (Note 2: If a cash account for the government is overdrawn in total, the balance
             should be classified as a liability in both the fund and government-wide statements.)
             (Note 3: Interfund balances generally should not be reported in agency funds,
             because resources held in an agency clearing account should be reported as assets
             in the appropriate funds. However, agency funds may report an interfund receivable
             when funds have incurred more liabilities than there are assets to pay them, and
             agency funds have paid out more cash than received. (GUIDE-SLG 8.75 & 5.32)

    b.   Are interfund services provided and used (formerly known as quasi-external transactions)
         reported as revenues in seller funds and expenditures/expenses in purchaser funds, and
         are unpaid amounts reported as interfund receivables and payables? (GUIDE-SLG 9.09)
         (Note 1: Most internal service fund activity is considered to be interfund services
         provided and used. (GUIDE-SLG 9.02)) (Note 2: An exception: When the general fund
         is used to account for risk-financing activity, interfund charges to other funds should be
         accounted for as transfers or reimbursements. (GUIDE-SLG 9.09))




                                                              -32-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

    c.   In governmental funds, are interfund transfers (redefined to include activities previously
         known as “operating” and “residual equity” transfers (GASB 34, para. 410)) reported as
         other financing sources/uses, and in proprietary funds, are interfund transfers reported
         after nonoperating revenues and expenses? (GUIDE-SLG 9.10) (Note: Interfund
         transfers are flows of assets between funds without equivalent flows of assets in return
         and without a requirement for repayment. (GUIDE-SLG 9.02))

    d.   Are interfund reimbursements not reported in the financial statements as interfund
         activity? (GASB Q&A #7.47.11 & 7.47.12; GUIDE-SLG 9.11) (Note: Reimbursement-
         type activity should be eliminated by reducing the expense in the function from which it
         was initially paid, and reporting the expense in the function to which it was allocated.)

    e.   Do interfund loans and interfund transfers reported in the various fund statements net to
         zero? (COD 1800.102) (Note 1: One exception would be if there is a difference in fiscal
         years between the primary government and a blended component unit.)
         (Note 2: Another exception exists when a capital asset is transferred from a proprietary
         fund to a governmental fund. A “transfer-out” may be reported in the proprietary fund
         (see discussion in checklist item below), and an explanation of the “unbalanced” transfer
         would be needed as part of the required note disclosure on interfund transfers. (GFOA’s
         “Accounting for Capital Assets”, pg. 102))

    f.   Is movement (reassignment/transfer) of a capital asset between an enterprise fund and
         a governmental fund not reported as an interfund transaction in the governmental fund
         and proprietary fund statements, and is it reported as a transfer only in the government-
         wide statement of activities? (Note 1: If a government moves a general capital asset to a
         proprietary fund, the movement is reported only in the proprietary fund as a capital
         contribution. In the reverse situation, the disposal of the capital asset would be reported
         by the enterprise fund as a nonoperating expense. In either case, the transaction is not
         considered to be an “interfund” transaction - the governmental fund would not report the
         event because there is no flow of current financial resources. In the statement of
         activities, both sides of the transaction would be reported as a transfer, requiring a
         reconciling item in the governmental funds’ reconciliation. (GUIDE-SLG 7.52; GASB
         Q&A #7.74.4)) (Note 2: In the above situation, GFOA recommends that the disposal of
         the capital asset in the proprietary fund be reported as a transfer out – with disclosure of
         the “unbalanced” transfer in the required inter-fund transfer note disclosures. (GFOA’s
         “Accounting for Capital Assets”, pg. 102 &.168) Because these 2 options result in the
         same effect, we will accept either presentation.)

    g.   Is the sale of a capital asset between an enterprise fund and a governmental fund reported
         correctly, recognizing an interfund transfer for the difference between carrying value and
         fair value? (Note: In all cases, assets transferred within the same reporting entity retain
         their carrying value. If, for instance, an enterprise fund is purchasing a capital asset, the
         enterprise fund should recognize the asset at the carrying value, and record a transfer
         out to a governmental fund for the difference between carrying value and fair value. The
         governmental fund should report an “other financing source” for the carrying value, and
         a transfer-in of the difference. (Q&A #Z.48.15; See also sample journal entries in
         GFOA’s “Accounting for Capital Assets”))

50. Does each financial statement include a reference to the Notes? (COD 2300.102 & .110;
    GAAFR pg. 295)

51. Fund Balances/Net Assets:

    a.   Do beginning fund balances/net assets agree to the prior year’s audited ending fund
         balances/net assets? (AU §420 – consistency & comparability between periods)



                                                              -33-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

   b.   Do ending fund balances/net assets on the operating/activity statements trace to the
        related amounts on the balance sheets/statements of net assets? (i.e., do the operating
        statements/activity statement include all changes in net assets (the all-inclusive format))?:
        (GASB COD 2200.141 (GW), 2200.159 (governmental), 2200.170 (proprietary) &
        2200.177 (fiduciary))

   c.   Pre-GASBS 54: Are fund balance reserves reported in governmental funds for
        inventories and prepaids, long-term loans receivable and advances (unless already offset
        by deferred revenue), encumbrances, equity in joint ventures, and if use is legally
        restricted for a purpose narrower than the fund itself? (2009-2010 COD 1800.142;
        GAAFR pg. –174 - 176) (Note 1: The term “reserve” indicates a portion of fund
        balance that is not appropriable for expenditure or that is legally segregated for specific
        future use.) (Note 2: See GASB Q&A #7.63.1 & 7.63.2 for discussion related to
        resources that are legally segregated for a specific use that is more specific than the
        reservations of the fund it is reported in. For example, gas tax funds legally restricted for
        road maintenance are not reported as reserved fund balance if reported in a gas tax fund,
        but would be reported as restricted net assets in the government-wide governmental
        activities column. However, the fund balance classification of a fund would not be
        changed accordingly when aggregated in the non-major fund column – the gas tax fund
        balance discussed above would be reported as” unreserved – special revenue funds”.)

   d.   Pre-GASBS 54: Are designations of fund balance not reported if there is a deficit
        unreserved fund balance? (GAAFR pg. 176) (Note: Any reservation or designation
        should have a positive balance.)

   e.   Are direct changes to beginning fund balances/net assets made only for: (GUIDE-SLG
        10.02)
        (Note: GASB Concepts Statement No. 4 identifies 7 fundamental components of
        government financial statements. Net position is the residual of all other elements
        presented in a statement of financial position and is measured by the difference between
        (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of
        resources. The term “net position” replaces the term “equity” for conceptual purposes
        only – the terms “equity”, “net assets”, and “fund balance” are still used for accounting
        and reporting purposes.)

        (1) Prior period adjustments, including the cumulative effect of a change in accounting
            principle or in the application of an accounting principle (includes changes in the
            financial reporting entity), and corrections of an error? (GAAFR pg 170; GUIDE-
            SLG 2.15) (Note: A change in capitalization threshold is not a change in
            accounting principle that requires restatement. (GASB Q&A #7.22.17))

        (2) Fund balances only - Changes in governmental fund inventories that are accounted
            for using the purchases method? (GUIDE-SLG 10.14; GAAFR pg. 90)

   f.   Does the internal service fund type have a reasonable fund equity? (Note: A significant
        surplus could indicate user funds being overcharged, and a significant deficit could
        indicate funds not being charged their proportionate share - GAAFR, page 98. GASB
        COD C50.128 discusses the basis an internal service fund may use to charge other funds
        for risk financing activities. Deficits don’t need to be charged back to funds in any one
        year, as long as adjustments are made over a reasonable period of time. The charge may
        also include a provision for expected future catastrophe losses, which may result in high
        net assets and annual revenues higher than annual expenses - see checklist item #65.i.)




                                                             -34-
DESK REVIEW – 2010

REVIEW ITEM                                                                                               YES   NO   N/A   REF

52.        Financial Statement Headings:
      a.   If the financial statements are of a component unit, do the titles of the component unit’s
           financial statements acknowledge that it is a component unit of another government?
           (COD 2600.124; GUIDE-SLG 3.26 & 14.45) (Note: If the reporting entity includes
           DPCU’s that aren’t included in the audited financial statements, there should be an
           opinion modification acknowledging that the financial statements do not include the data
           of the component units necessary for reporting in conformity with GAAP (COD
           2600.123; GUIDE-SLG 14.22; AU 508.35 - .44))

      b.   If prior-period information is presented in partial or summarized manner, is this described
           by appropriate financial statement titles (e.g., by adding “…with partial/summarized
           financial information for the year ended 6/30/20PY”) or by appropriately labeling the
           column heading? (GUIDE-SLG 2.54)

53. If a government formerly reported using the AICPA Not-for-Profit model, does it no longer
    follow that model? (Note: No governmental organization is allowed to report using the NFP
    model. If a government reported at 6/30/99 using the NFP model, it has the option of
    reporting as a government engaged in only business-type activities, even though it doesn’t
    meet the criteria of an enterprise fund, as set forth in paragraph 67 of GASBS 34. (Guide-
    SLG 12.07; GASB Q&A #7.103.1))

54. If the audited government is a health care organization (i.e., hospital, nursing home, or clinic),
    does the reporting follow the provisions of Section Ho5 of the GASB Codification?? (Note:
    Section Ho5 of the GASB Codification supersedes the AICPA Audit and Accounting Guide
    Health Care Organizations (GUIDE-HCO) in regard to the discussion of the basic financial
    statements required by governmental entities, although the GUIDE-HCO continues to provide
    guidance on individual transactions unique to healthcare organizations. (COD Ho5.601) In
    addition, the GUIDE-SLG includes the most relevant matters for financial statements of
    legally separate governmental hospitals and other health care providers. (GUIDE-SLG
    12.13))

55. If the entity has an IRC Section 457 Deferred Compensation Plan, are the assets of the plan
    (1) reported as a pension (and other employee benefit) trust fund, if the entity functions in a
    trustee capacity for the plan (e.g. has administrative involvement or performs investing
    function) (Note: Meets the criteria in GASB COD 1300. 102(c) & .111) OR (2) not reported
    in the entity’s financial statements because the entity does not function in a trustee capacity
    for the plan? (COD D25.101)

56. If the government operates an airport and receives passenger facility charges, are those fees
    not reported as a component of operating income? (Note: In the Basis for Conclusion of
    GASBS #33 these revenues were considered exchange-like transactions and therefore should
    be recorded on the occurrence of the exchange.) (GUIDE-SLG 12.23)

57. GASB Statement #31:

      a.   Are changes in the fair value of investments, recognized as revenue in the operating
           statement (or other statement of activities)? (COD I50.112; GUIDE-SLG 5.21; GASB
           Q&A #6.28.2 & 6.28.3) (Note: If overall investment income is negative, it should be
           reported as negative revenue. (GASB Q&A #6.28.6))

      b.   If identified separately as an element of investment income, is the change in the fair value
           of investments captioned net increase (decrease) in the fair value of investments? (COD
           I50.112; GUIDE-SLG 5.34)




                                                                -35-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

    c.   Are realized gains and losses not displayed separately from the net increase (decrease) in
         the fair value of investments? (Note 1: Realized gains and losses should be reported
         within the revenue category of investment income, along with all changes in fair value of
         investments. Realized gains and losses may be separately displayed only in the separate
         reports of governmental external investment pools.) (COD I50.112, GUIDE-SLG 5.34)
         (Note 2: Realized gains and losses may be reported for investments reported using cost-
         based measures; if so, the financial statements should clearly indicate that the
         presentation applies only to investments reported at amortized cost. (GUIDE-SLG 5.35;
         GASB Q&A #6.14.1))

    d.   If the entity is a sponsoring government of an external investment pool:

         (1) Is the external portion of each pool reported as a separate investment trust fund (a
             fiduciary fund) that reports transactions and balances using the economic resources
             measurement focus and the accrual basis of accounting? (COD I50.117; GUIDE-
             SLG 12.70) (Note: This “separate” reporting requirement applies to the combining
             financial statements (SI), not the basic financial statements.)

         (2) Are the differences between the assets and liabilities of the pool captioned “net assets
             held in trust for pool participants” or similar title? (COD I50.117; GUIDE-SLG
             12.70)

    e.   If the entity provides individual investment accounts to other legally separate entities that
         are not part of the same financial reporting entity, are these reported in one or more
         separate investment trust funds, and reported as in “d.” above? (COD I50.119)

    f.   If a separate annual financial report is issued for an external investment pool, do the basic
         financial statements include MD&A, a statement of net assets, a statement of changes in
         net assets, notes, and RSI other than MD&A, if applicable? (COD In5.103: GUIDE-SLG
         12.71)

58. Is the fair value of commodities recognized as revenue in the period when all eligibility
    requirements are met (typically, the period when the commodities are received)? (GASB
    Q&A #Z.33.4; COD N50)

59. Are Pollution Remediation Obligations reported in the government-wide and fund statements
    appropriately? (COD P40; GUIDE-SLG 8.51 – 8.55)

60. OPEB: Are OPEB expenses/expenditures and liabilities reported appropriately? (Note: See
    checklist item #74 for RSI requirements for OPEB.)
    See the FAQ at the Local Government Services Website:
    http://doa.mt.gov/lgsb/default.mcpx
    (Note 1: GASB 45 (Accounting and Financial Reporting by Employers for Post Employment
    Benefits Other than Pensions) is effective in three phases based on total annual revenues
    (phase-in periods of FY2008, FY2009 & FY2010). Phase 2 governments required to
    implement GASB 45 in FY2009 include: Counties: Butte-Silver Bow, Cascade, Flathead,
    Gallatin, Lewis & Clark, Lincoln, Missoula, Ravalli, Toole & Yellowstone; Cities: Billings,
    Bozeman, Great Falls, Helena, Kalispell, & Missoula; School Districts: Belgrade, Billings,
    Bozeman, Browning, Butte, Colstrip, Columbia Falls, Great Falls, Hardin, Havre, Helena,
    Kalispell, Laurel, Libby, Miles City, Missoula, Polson, Poplar & Whitefish. All other local
    governments are Phase 3 and are required to implement GASB 45 in FY2010.)
    (Note 2: OPEB includes healthcare benefits (medical, dental, vision, hearing and other
    health related benefits) provided either separately or through a defined-benefit pension plan,
    and also includes life insurance, disability, L/T care & other benefits when provided
    separately from a pension plan .(COD P50.104))


                                                               -36-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

60. OPEB-continued:
    (Note 3: An OPEB commonly offered by Montana local governments: State law (MCA 2-18-
    704) requires that a member of a group insurance plan who retires from active service under
    a defined benefit or defined contribution pension plan must be allowed to remain a member of
    the group insurance plan until the member becomes Medicare-eligible. A retiree electing to
    remain a member must pay the full premium. When a government’s retirees and current
    employees are insured together as a group, the premiums paid by the retirees may be lower
    than they would have been if the retirees were insured separately – this is defined as an
    implicit rate subsidy. Implicit rate subsidies are considered to be OPEB - even when there
    is no employer contribution (See Para 96 – 108 of GASBS #45 for a discussion; See GASB
    Q&A #8.21.1 to 8.21.9 for examples; GUIDE-SLG 8.38)).
    (Note 4: OPEB vs. termination benefits: If postemployment healthcare benefits are given by
    an employer for as compensation for employee services, the benefits are OPEB. If the
    benefits are given as an inducement to employees to hasten termination of services, the
    benefits are termination benefits. (COD P50.105) COBRA benefits are considered to be a
    form of termination benefit (GASB 47), not OPEB. (GASB Q&A #Z.47.1) Similarly,
    conversion of unused sick leave to an individual account to be used for payment of
    postemployment benefits is an example of a termination payment, not OPEB (COD P50.106).
    If, however, the unused sick leave is converted to provide/enhance a defined benefit OPEB,
    the unused sick leave would be considered OPEB. (GASB Q&A #8.9.1 to 8.9.3))

Reporting of Discretely Presented Component Units (DPCU’s)

61. Are DPCU’s reported only in the government-wide financial statements, and not in the fund
    financial statements? (Note 1: However, DPCU’s that are fiduciary in nature should be
    included only in the fund financial statements with the primary government’s fiduciary funds.)
    (COD 2600.107) (Note 2: All DPCU’s should be reported using the economic
    resource/accrual MFBA. (GUIDE-SLG 3.15))

62. Are DPCU’s presented to the right of the total column of the primary government and do the
    columns distinguish between the financial data of the primary government and that of the
    DPCU’s by providing descriptive column headings? (COD 2600.107; GUIDE-SLG 3.15)

63. Is information about each major DPCU provided in the basic financial statements in one of
    the following three ways? (COD 2200.191 & 2600.108; GUIDE-SLG 3.19) (Note 1 The
    criteria used to determine which DPCU’s are major (GASBS 14) is different than the criteria
    used to determine which funds are major for reporting in the fund financial statements
    (GASBS 34). To determine which DPCU’s are major, consideration should be given to each
    DPCU’s significance relative to the other DPCU’s and the nature and significance of its
    relationship to the primary government (COD 2600.108; GASB Q&A #4.28.17)) (Note 2:
    Nonmajor component units should be aggregated in a single column in each of the options.)

    a.   Is each major DPCU presented in a separate column in the statements of net assets and
         activities? (See illustrative statements at COD 2200.911, Exhibits A-1 & A-2 &
         2200.914, Exhibits B-1 & B-2.) (Note 1: This is the applicable reporting format when
         there is only one DPCU. (GASB Q&A #4.28.9)) (Note 2: The data presented for each
         DPCU generally should be its aggregated total (i.e. governmental activities and BTA
         taken from the statement of net assets and statement of activities (excluding it’s fiduciary
         funds, but including its own component units) are generally combined into one column.)
         (COD 2600.111; GUIDE-SLG 3.20; GASB Q&A #4.28.8 & 4.28.11))

                                                OR
    b.   Are combining statements of major DPCU’s included in the basic statements after the
         fund financial statements? (See illustrative statements at COD 2600.904, Exhibits F-1 &
         F-2) (See GASB Q&A #4.28.20 for discussion of format)



                                                              -37-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

                                                OR
    c.   Are condensed financial statements presented in the notes – with the detail set forth in
         COD 2600.109 & 2200.192? (See illustrative disclosure at COD 2600.905)

64. If a DPCU does not issue separate financial statements, are fund financial statements for that
    DPCU presented as SI? (COD 2600.111; GUIDE-SLG 3.20; & GASB Q&A #4.28.8)

Notes to the Financial Statements

65. Do the Notes include: (COD 2300)
    (Note 1: Disclosure in the notes is needed only when the required information is not
    displayed on the face of the financial statements. (COD 2300.103))
    (Note 2: OCBOA financial statements should contain, as applicable, disclosures similar to
    those required for GAAP financial statements. (AU 623.09 & .10; AU 9623.90 - .95; GUIDE-
    SLG 15.04))
    (Note 3: Notes should distinguish between information pertaining to the primary government
    and that of its DPCU’s. (COD 2300.104))
    (Note 4: Misstatements that cause the financial statements not to be in conformity with GAAP
    include omission of required note disclosures and note disclosures that aren’t presented in
    conformity with GAAP. The auditor should evaluate the adequacy of note disclosures in
    relation to the fair presentation of each affected opinion unit. (GUIDE-SLG 13.05; AU 431))
    See COD 2300.902 & .903 for sample note disclosures.

    a.   Summary of Significant Accounting Policies: (COD 2300.106(a) & .901)
         (Note: The Summary should include a discussion of those accounting principles and
         methods that involve (1) a selection from existing acceptable alternatives, (2) principles
         and methods peculiar to the industry, and (3) unusual or innovative applications of
         GAAP. (GUIDE-SLG 2.46) See Appendix A of GUIDE-SLG 2.66 for a listing of
         accounting and reporting alternatives)

         (1) Is this the first note? (COD 2300.110; GUIDE-SLG 2.46)

         (2) Government-Wide Financial Statements: A description of the government-wide
             financial statements, noting that neither fiduciary funds nor component units that are
             fiduciary in nature are included? (COD 2300.106(a)(1); GUIDE-SLG 2.45) (Note:
             This should include descriptive comments about the purposes and scope of the GW
             statements. In addition to a discussion of the absence of fiduciary funds, it could
             include a discussion of governmental and business-type activities, components of net
             assets, and key elements of the statement of activities. (GASB Q&A #7.84.1))

         (3) Reporting Entity:

             (a) A brief description of the component units of the financial reporting entity and
                 their relationships to the primary government, including a discussion of the
                 criteria for including component units in the financial reporting entity and how
                 the component units are reported, and including how the separate financial
                 statements for the individual component units may be obtained? (COD
                 2300.106(a)(2), 2600.120; GUIDE-SLG 3.22) (Note 1: This disclosure not
                 necessary when the entity has no blended or discrete component units.) (Note 2:
                 See provisions of GASBS 14 & 39 at COD 2100)




                                                              -38-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. a.   Summary of Significant Accounting Policies- continued:

                 (1) the nature and amount of significant transactions that each major
                     component unit has with the primary government and other component
                     units? (COD 2300.106(p); GUIDE-SLG 3.22) (Note: If a FDRA is
                     reported as a discretely presented component unit, there may be
                     significant transactions to disclose because of the City’s requirement to
                     finance the “sound funding” of the FDRA. See MCA 19-18-504)

             (b) If the entity is a component unit of another government, do the notes identify the
                 primary government and disclose its relationship with the primary government?
                 (COD 2300.107(r) & 2600.124; GUIDE-SLG 3.26 & 14.45)

             (c) Does the reporting entity note use current (GASBS 14 & 39) terminology rather
                 than NCGA terminology? (COD 2100)

         (4) Basis of presentation - government-wide financial statements: Governmental and
             business-type activities, major component units? (COD 2300.901)

             (a) The policy for eliminating internal activity in the statement of activities? (COD
                 2300.106(a)(6); GUIDE-SLG 9.20; GASB Q&A #7.84.2)

             (b) effect of component units with differing fiscal year ends, and changes in fiscal
                 years of component units? (COD 2300.107(q) & 2600.119; GUIDE-SLG 3.18,
                 3.22 & 9.26, GASB Q&A #7.22.10) (Note: Example of an effect that should be
                 disclosed: Imbalance in internal balances.)

         (5) Basis of presentation – fund financial statements: Major and nonmajor
             governmental and enterprise funds, internal service funds, and fiduciary funds by
             fund type? (COD 2300.901)

             (a) If the primary government is presented in more than a single column, a
                 description of the activities accounted for in each of the following columns –
                 major funds, internal service funds, and fiduciary fund types – presented in the
                 basic financial statements? (Note: With the exception of the general fund or its
                 equivalent, the descriptions should be specific to the particular government,
                 rather than general definitions that could describe any government.) (COD
                 2300.106(a)(3), GUIDE-SLG 2.45)

             (b) Do the major funds identified in the notes agree to the major funds reported in
                 the financial statements?

             (c) Interfund eliminations in fund financial statements not apparent from headings?
                 (COD 2300.107(m) & 2200.105, footnote 5)

         (6) FASB Pronouncements: Policy for applying FASB pronouncements issued after
             11/30/89 to enterprise funds of the primary government (and, through application to
             the underlying enterprise funds, to business-type activities)? (COD 2300.106(a)(10),
             P80.103; GUIDE-SLG 2.45 & 2.66, GASB Q&A Z.20.1) (Note: The paragraph 7
             option in GASBS 20 does not apply to internal service funds. (GASBS 34, para. 423;
             Q&A #7.8.1))




                                                            -39-
DESK REVIEW – 2010

REVIEW ITEM                                                                                         YES   NO   N/A   REF

65. a.   Summary of Significant Accounting Policies- continued:

         (7) Measurement Focus and Basis of Accounting used in the government-wide
             statements (should be economic resources focus and accrual basis)? (COD
             2300.106(a)(4); GUIDE-SLG 2.45) (Disclosure of accounting policies used for
             recognizing revenues and expenses/expenditures – GUIDE-SLG 6.85 & 8.110)
             (Note: Although there is no specific requirement in GASBS 34, the notes should also
             disclose the measurement focus and basis of accounting used in the fund financial
             statements (i.e., governmental funds – current financial resource focus and modified
             accrual basis; proprietary and fiduciary funds – economic resources focus and
             accrual basis (GASB Cod. 2300.901 & Section 1600))

             (a) The revenue recognition policies (including recognition policies for
                 nonexchange transactions) used in fund financial statements, including the
                 length of time used to define available for purposes of revenue recognition in
                 the governmental fund financial statements? (COD 2300.106(a)(5), 1600.106-
                 .115, .130 & .134, & P70.104; GUIDE-SLG 6.85)

         (8) If budgetary comparison information is reported as part of the basic financial
             statements, rather than RSI: (COD 2300.106, footnote # 2 & .901, footnote # 8;
             COD 2400.103, footnote #5; GAAFR, page 205)

             (a) Budgetary basis of accounting? (COD 2400.103 & 2300.901, footnote #8; COD
                 1700)

             (b) Any excesses of expenditures over appropriations in the individual funds
                 presented in the comparison (based on the legal level at which budgetary control
                 is exercised)? (COD 2400.103, 2300.106 & 901[see footnotes]; GUIDE-SLG
                 11.14)

             (c) Budget/GAAP reporting differences not otherwise reconciled in the financial
                 statements? (COD 2300.106, footnote 2 & 2400.103; GUIDE-SLG 11.14)
                 (Note: Although a government may maintain its accounts and report on a
                 budgetary basis other than GAAP to demonstrate legal compliance, the
                 government should maintain sufficient supplemental records to permit
                 presentation of financial statements in conformity with GAAP. (GUIDE-SLG
                 11.11))

             (d) If a budget is not adopted for the general or a major special revenue fund
                 because it is not legally required, is that situation disclosed? (GUIDE-SLG
                 11.16 & 14.57; COD 2300.602))

         (9) Assets, Liabilities, and Net Assets and Fund Balances: (Note: These should be
             described in the order of appearance in the statement of net assets/balance sheet –
             COD 2300.901)

             (a) Cash & Cash Equivalents: Definition of cash and cash equivalents, and the
                 entity’s policy for determining which of those items are treated as cash
                 equivalents in the statement of cash flows for proprietary funds? (COD
                 2300.106(a)(11), 2450.106 - .108; GUIDE-SLG 5.39 & 5.44) (Note 1: Not all
                 investments that meet the GASB’s definition of cash equivalents are required to
                 be treated as such. Note 2: Any change in this policy is a change in accounting
                 principles that should be reported as a restatement.)




                                                            -40-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

65. a.   Summary of Significant Accounting Policies- continued:

             (b) Valuation bases for material balance sheet amounts: (COD 2300.901)

                 (1) Investments? (GAAFR pg. 204; COD I50.120; GUIDE-SLG 5.44)

                     (a) the methods and significant assumptions used to estimate the fair value
                         of investments, if that fair value is based on other than quoted market
                         prices?

                     (b) the policy for determining which investments, if any, are reported at
                         amortized cost?

                     (c) for any investments in external investment pools that are not SEC-
                         registered, a brief description of any regulatory oversight for the pool
                         and whether the fair value of the position in the pool is the same as the
                         value of the pool shares?

                     (d) any involuntary participation in an external investment pool? (GASB
                         Q&A #1.66.4)

                     (e) if an entity cannot obtain information from a pool sponsor to allow it to
                         determine the fair value of its investment in the pool, the methods used
                         and significant assumptions made in determining that fair value and the
                         reasons for having had to make such an estimate?

                     (f) any income from investments associated with one fund that is assigned
                         to another fund? (GASB Q&A #1.66.8) (Note 1: All interest collected
                         on the deposits or investments of school district funds must be credited
                         to the fund from which the money was withdrawn. An exception to this
                         is that interest earned on the investment of bond proceeds must be
                         credited to the debt service fund or the building fund, at the discretion
                         of the board of trustees. (Sections 20-9-213(4), MCA) Note 2: Most
                         investment income received by a county, city or town will go to the
                         general fund. See revenue compliance supplement for a listing of the
                         exceptions. )

                     (g) for entities that disclose realized gains and losses, and for external
                         investment pools that report realized gains and losses, a disclosure that:

                          (1) the calculation of realized gains and losses is independent of a
                              calculation of the net change in the fair value of investments?

                          (2) realized gains and losses on investments held in more than one
                              fiscal year and sold in the current year were included as a change
                              in the fair value of investments reported in the prior year(s) and the
                              current year?

                 (2) Inventories – including basis of valuation (i.e. cost), the method used to
                     apply the valuation basis (i.e. weighted average, FIFO), and when
                     expenditures are reported in governmental funds (i.e. purchase or
                     consumption method)? (GAAFR pg. 205)




                                                             -41-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

65. a.   Summary of Significant Accounting Policies- continued:

             (c) Capitalization Policy for Capital Assets: The policy for capitalizing assets
                 and for estimating the useful lives of those assets (used to calculate depreciation
                 expense)? (COD 2300.106(a)(7); GUIDE-SLG 7.66 (Note 1: Although there
                 are no required elements, a capitalization policy might include capitalization
                 thresholds, methods used for estimating historical cost or fair value, and the
                 extent of infrastructure capitalization. (GASB Q&A #7.85.4) Disclosures might
                 also include the basis for valuing capital assets, including capitalization of
                 interest and ancillary charges. (GUIDE-SLG 7.66))
                 (Note 2: Capitalization of construction-period interest costs should not be
                 applied to governmental activities. (GASBS 37, para. 30 – 35) See discussion
                 of capitalization of interest for proprietary funds and business-type activities -
                 GAAFR, pgs. 100 – 105))

                 (1) A general description of the method(s) used to compute depreciation with
                     respect to major classes of depreciable assets? (GUIDE-SLG 7.66)

                 (2) For Phase 3 governments – a disclosure on an ongoing basis that describes
                     whether the government opted to, or to not, retroactively report
                     infrastructure? (For instance: “General infrastructure assets acquired
                     prior to July 1, 2003, are not reported in the basic financial statements.”
                     OR “General infrastructure assets include all roads and bridges and other
                     infrastructure assets acquired subsequent to July 1, 2003”. (GASB Q&A
                     #7.85.5 & 7.104.15 – 7.104.17; NCGAS 1 & APB Opinion 22) (Note:
                     GASBS 51, effective for FY2010, requires prospective reporting of
                     intangible assets, and requires Phase 1 & 2 governments to also
                     retroactively report. Phase 3 governments are encouraged but not required
                     to report intangible assets retroactively, and as such, this same disclosure
                     (i.e., selection from existing acceptable alternatives ) will be applicable for
                     intangible assets also. (GASBS 51))

             (d) Restricted/Unrestricted Resources: The government’s policy regarding
                 whether to first apply restricted or unrestricted resources when an expense is
                 incurred for purposes for which both restricted and unrestricted net assets are
                 available? (COD 2300.106(a)(12); GUIDE-SLG 10.23 & 8.110; GASB Q&A
                 #7.84.3 & # Z.33.6)

             (e) If GASBS 54 is early implemented: Information about fund balance
                 classification policies and procedures: (COD 1800.155 & 2300.106(a)(13);
                 GUIDE-SLG 10.31)
                 (1). Whether the government considers restricted or unrestricted amounts to
                      have been spent when an expenditure is incurred for purposes for which
                      both restricted and unrestricted (committed, assigned, unassigned) fund
                      balance is available?,

                 (2). Within unrestricted fund balance,whether committed, assigned, or
                      unassigned amounts are considered to have been spent when an expenditure
                      is incurred for purposes for which amounts in any of those unrestricted fund
                      balance classifications could be used? (Note: If the government does not
                      establish a policy for its use of unrestricted fund balance amounts, it should
                      consider that committed amounts would be reduced first, followed by
                      assigned amounts, and then unassigned amounts.)




                                                             -42-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

65. a.   Summary of Significant Accounting Policies- continued:

         (10) Revenues, Expenditures, and Expenses:

             (a) A description of the types of transactions included in program revenues in the
                 government-wide statement of activities? (COD 2300.106(a)(8); GUIDE-SLG
                 6.85)

             (b) The policy for allocating indirect expenses to functions in the government-wide
                 statement of activities, including:? (COD 2300.106(a)(8) & 2200.130; GASBS
                 34, para. 357 - .360; GUIDE-SLG 8.110)

                 (1) A disclosure of the amount of direct interest expense that is excluded from
                     indirect interest expense reported on a separate line in the statement of
                     activities, and that is instead reported in other functions – if this information
                     is not presented on the face of the statement? (COD 2300.107(bb) &
                     2200.134; GUIDE-SLG 8.101)

                 (2) Whether administrative overhead charges are included in direct expenses?
                     (COD 2200.131)

             (c) Property tax revenue recognition? (COD 2300.107(b) & .901, & P70.104 -
                 .105; GUIDE-SLG 6.85)

                 (1) If, because of unusual circumstances, the facts justify using a period greater
                     than 60 days as the availability period for the modified accrual recognition
                     of property taxes, the period being used and the facts that justify it? (COD
                     P70.104; GUIDE-SLG 6.85)

             (d) Policy for recognizing expenditures/expenses for vacation, sick leave, and other
                 compensated absences? (COD 2300.901, C60)

             (e) The government’s policy for defining operating and nonoperating revenues, and
                 operating expenses of proprietary funds? (COD 2200.171 & footnote 33; COD
                 2300.106(a)(9); GUIDE-SLG 6.85)

             (f) Disclosure of any nonexchange transactions (grants, sales and property taxes,
                 contributions) that are not recognizable because they are not measurable. (COD
                 2300.107(k) & N50.108; GUIDE-SLG 6.85)

             (g) Discounts and allowances that reduce gross revenues (e.g., allowance for
                 estimated uncollectible receivables), when not reported (parenthetically or on a
                 separate line) on the face of the financial statements? (COD 2300.107(ee) &
                 2200.169, footnote 32; GUIDE-SLG 6.83)

         (11) Unusual or innovative accounting policies for significant items? (NCGAS 1 &
              APB Opinion 22; GUIDE-SLG 2.46; COD 2300.901)




                                                              -43-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

65. b.   Significant violations of finance-related legal and contractual provisions and actions
         taken to address such violations? (COD 1200.112, 2300.106(h); GUIDE-SLG 2.45 &
         8.110)
         (Note 1: Disclosure requirements for violations of legal provisions are also found in
         sections of the checklist related to budgets, cash & investments, and long-term debt.)
         (Note 2: Regardless of whether budgetary comparison information is presented as RSI
         or as part of the basic financial statements, if the excess of expenditures over
         appropriations in any fund (including those funds not required to be presented in the
         comparison) is considered to be a material violation, that violation, and actions taken to
         address it, should be disclosed here. (GUIDE-SLG 11.15; GAAFR pg. 205 - 206))

    c.   Deficit fund balances or fund net assets of individual nonmajor funds? (COD
         2300.106(n), GUIDE-SLG 10.23 & 8.64)

    d.   Detail of Reconciling Items: If aggregated information in the summary reconciliations
         of fund financial statements to the government-wide financial statements obscures the
         nature of the individual elements of a particular reconciling item, is there a detailed
         explanation of the reconciling item in the notes (after the SSAP)? (COD 2300.107(dd),
         2200.154 & 2300.901, footnote 9; GUIDE-SLG 10.19 & 10.23) (See illustrative
         disclosures at GASBS 34, Appendix C – Notes 4 & 5, pg 244 & pgs 252 – 264) (Note:
         This disclosure is required if a reconciling item is a combination of several balances or
         transactions or is a net adjustment. (GASB Q&A #7.57.3))

    e.   Detailed Information on Assets where appropriate, such as: (COD 2300.901)

         (1) Cash and Investments: (COD 2300.106(b) & (c), C20, I50.120 - 136) (Note:
             Deposit & investment disclosures should encompass the entire primary government,
             including its fiduciary funds.. (GUIDE-SLG 5.42))

             (a) types of investments authorized by legal or contractual provisions? (COD
                 I50.125; GUIDE-SLG 5.44) (Note 1: Disclosure should be made of both
                 statutory investment authority and the entity’s investment policy. (GASB Q&A
                 #1.5.2)) (Note 2: If an investment type is authorized but never used by the
                 entity, it should still be disclosed – information about the government’s ability to
                 invest in the instrument is important to a user’s evaluation of potential future
                 risk. (GASB Q&A #1.7.2))

             (b) significant violations of legal or contractual provisions for deposits and
                 investments (i.e., collateral violations; unauthorized deposits/investments), and
                 actions taken to address the violations? (COD C20.106 & I50.126; GUIDE-
                 SLG 5.44 & 5.61)

             (c) GASBS #40 Disclosures: (COD C20 & I50; GUIDE-SLG 5.44) (Note: GASBS
                 40 risk disclosures should be made for the primary government, and should also
                 be made for governmental and business-type activities, individual major funds,
                 non major funds in the aggregate, or fiduciary fund types when the risk
                 exposures are significantly greater than the risks of the primary government.
                 (COD C20.104 & I50.122; GASB Q&A #1.4.3) Investment disclosures should
                 be organized by investment type. (COD I50.124; GASB Q&A #1.3.2))

                  (1) a brief description of deposit or investment policies related to investment
                      risks that the entity is exposed to? (COD C20.109 & I50.127)
                      (Note 1: Risks that the entity might be exposed to include credit, custodial
                      credit, concentration of credit, and interest rate risks. If the entity holds
                      only deposits, the only risk that may be applicable is custodial credit risk.)
                      (Note 2: If the entity has no formal policy that addresses a specific type of
                      risk that it is exposed to, that fact should be indicated.)


                                                              -44-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

65. e.   Detailed Information on Assets – continued:

                     (Note 3: For discussion of investment policy, see GASB Q&A #1.5.1 –
                     #1.5.5. If an entity’s investment policy is limited to complying with State
                     law, the portions of law relating to the risks required to be disclosed should
                     be disclosed. If State law doesn’t address a risk, the disclosure should
                     indicate that the entity has not adopted an investment policy on that point.)

                 (2) Credit Risk: the credit quality ratings of investments in debt securities as
                     described by nationally recognized rating agencies? (COD I50.128)
                     (Note 1: This disclosure is applicable to external investment pools, money
                     market funds, bond mutual funds, and other pooled investments of fixed
                     income securities, but is generally not applicable to obligations of, or
                     explicitly guaranteed by, the US government. It is applicable to mutual
                     funds that restrict investments to obligations of, or explicitly guaranteed by,
                     the US government. (GASB Q&A #1.9.12))
                     (Note 2: If the investment is unrated, that fact should be disclosed.)
                     (Note 3: Repurchase agreements aren’t subject to credit risk disclosures if
                     the securities underlying the repos are exempt from such disclosure.
                     Securities underlying repos are often U.S. Treasuries of obligations
                     guaranteed by the U.S. government – which require no disclosure. (GASB
                     Q&A #1.9.10))

                 (3) if the entity has Deposits at year-end that are exposed to Custodial Credit
                     Risk (i.e., not covered by depository insurance and either (a)
                     uncollateralized, (b) collateralized with securities held by the pledging
                     financial institution, or (c) collateralized with securities held by the
                     institution’s trust department or agent but not in the entity’s name), is there
                     a disclosure of the amount of the exposed bank balances, the fact that the
                     balances are uninsured, and on what basis (a, b, or c) the balances are
                     exposed? (COD C20.107)
                     (Note 1: An exception-based disclosure requirement was adopted in
                     GASBS40 for reporting custodial credit risk. Category 1 & 2 disclosures
                     from GASBS 3 have been eliminated, and disclosure is required only when
                     there is category 3 exposure. Reference to the categories of risk has been
                     eliminated. (GASB Q&A #1.10.1))
                     (Note 2: Money market accounts should be treated like any other deposit
                     account for purposes of custodial credit risk. (GASB Q&A #1.40.1)
                     However, investments in money market funds are not subject to custodial
                     credit risk disclosures. (GASB Q&A #1.10.4))

                 (4) if the entity has Investment Securities (including securities underlying
                     repurchase agreements) at year-end that are exposed to Custodial Credit
                     Risk (i.e., uninsured, not registered in the name of the entity and are held by
                     either the counterparty or the counterparty’s trust department or agent but
                     not in the entity’s name), a disclosure of the investments’ type, the reported
                     amount, and how the investments are held (i.e., by counterparty or by
                     counterparty’s trust department or agent)? (COD I50.129) (Note 1: This
                     disclosure is not applicable to investments in external investment pools,
                     open-end mutual funds, or securities underlying reverse repurchase
                     agreements.) (Note 2: If a school district’s investments are held by the
                     county treasurer in an individual investment account, those investments are
                     subject to custodial credit risk disclosures. If the investments are held in the
                     county’s external pool, they would not be subject to those disclosures.
                     (GASB Q&A # 1.51.1))




                                                             -45-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

65. e.   Detailed Information on Assets – continued:

                 (5) Concentration of Credit Risk: if the entity has investments in any one
                     issuer that represent 5% or more of total investments, a disclosure of those
                     investments by amount and issuer? (COD I50.130) (Note: This
                     requirement not applicable to investments issued or explicitly guaranteed
                     by the US government, and investments in mutual funds, external investment
                     pools, and other pooled investments.)

                 (6) Information about the Interest Rate Risk of debt investments, and terms of
                     investments with fair values that are highly sensitive to interest rate
                     changes? (COD I50.131; See acceptable methods for this disclosure at
                     COD I50.132) (Note 1: If terms of a debt investment cause its fair value to
                     be highly sensitive to interest rate changes, and if those terms are not
                     already included in the interest rate risk disclosure, the terms and fair value
                     of that investment should be disclosed. (COD I50.133; GUIDE-SLG 5.44))
                     (Note 2: Not applicable for 2a7-like pools, such as STIP.)

             (d) Derivatives: If the entity has derivatives, are the required disclosures made?
                 (GASB TB 2003-1; Effective FY2010: GASBS #53 - COD D40 &
                 2300.107(kk); GUIDE-SLG 8.110) (Note: Although many derivatives are not
                 allowable investments for Montana local governments, there may be some
                 derivatives embedded in allowable investments – for instance, see Q&A
                 #6.19.2.)

             (e) If the entity is the sponsoring government of an external investment pool: (COD
                 I50.118, In5.103, & 2300.107(aa))

                 (1) a description of how to obtain the separate report, if the external investment
                     pool issues a separate report? (Note 1: A copy of the investment pool
                     report should be obtained for our files.) (Note 2: The separate report
                     should include an MD&A, statements of net assets and changes in net
                     assets, notes, and RSI other than MD&A as applicable. No cash flow
                     statement is required. (COD In5.103))

                 (2) if the external investment pool does not issue a separate report, the
                     following disclosures: (Note: Other disclosures required by COD C20,
                     I50, I55 & I60 should also be made, as applicable.)

                     (a) a brief description of any regulatory oversight (including whether the
                         pool is registered with the SEC as an investment company)?

                     (b) the frequency of determining the fair value of investments?

                     (c) the method used to determine participants’ shares sold and redeemed
                         and whether that method differs from the method used to report
                         investments?

                     (d) whether the pool sponsor has provided or obtained any legally binding
                         guarantees during the period to support the value of shares?

                     (e) the extent of involuntary participation in the pool, if any?

                     (f) a summary of the fair value, the carrying amount (if different from fair
                         value), the number of shares or the principal amount, ranges of interest
                         rates, and maturity dates of each major investment classification?

                                                             -46-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

65. e.   Detailed Information on Assets – continued:

                      (g) if the financial report distinguishes among different components of
                          investment income (for example, interest, dividend, and other income
                          versus the net increase or decrease in the fair value of investments), the
                          accounting policy for defining each of the components it reports?

                      (h) for each pool, condensed statements of net assets and changes in net
                          assets, as note disclosures? (COD I50.118) (Note: If a pool includes
                          both internal and external investors, these condensed financial
                          statements should include, in total, the net assets held in trust for all
                          pool participants, and the equity of participants should distinguish
                          between internal and external portions.)

             (f) Reverse repurchase agreements? (COD 2300.107(s), I55; GUIDE-SLG 5.44)

             (g) Securities lending transactions? (COD I60.109-.114 & 2300.107(t); GUIDE-
                 SLG 5.44)

             (h) Land and other real estate held as investments by endowments? (GASBS #52,
                 effective for FY2009 – COD I50; GUIDE-SLG 5.44)

         (2) Receivables:

             (a) If significant receivables (e.g., accounts, interest, grants receivable, due from
                 other governments) are aggregated in the statement of net assets or the balance
                 sheets and significant components of receivables are obscured, are details of the
                 aggregated totals disclosed? (COD 2300.119 & 2300.107(ff); GUIDE-SLG
                 6.85) (Note: Disaggregation on the face of the fund financial statements would
                 provide adequate disclosure. (GASBS 38, para. 54))

             (b) If there are significant receivable balances that are not expected to be collected
                 within one year of the financial statement date, is that fact disclosed? (COD
                 2300.119; GUIDE-SLG 6.85)

             (c) Details of the government’s property tax calendar (lien dates, levy dates, due
                 dates, collection dates, etc.)? (COD P70.108; GUIDE-SLG 6.85)

         (3) Capital Assets: Information presented about major classes of capital assets,
             including: (COD 2300.112 & 2300.106(l); GASBS 34, para. 363; GUIDE-SLG
             7.65) (See illustrative disclosure at COD 2300.902, Note 1))
             (Note 1: These details should be divided into major classes of capital assets, and
             between those associated with governmental activities and those associated with
             business-type activities. Also, capital assets not being depreciated should be
             disclosed separately from those that are being depreciated. (COD 2300.111;
             GUIDE-SLG 7.65))
             (Note 2: Fully-depreciated capital assets should be reported with both historical
             cost and accumulated depreciation. (GUIDE-SLG 7.20; GASB Q&A #7.13.5))
             (Note 3: Effective for FY2010, GASBS 51 requires that intangible assets (such as
             easements, water rights, timber rights, patents, trademarks, and computer software)
             should be classified as capital assets and existing accounting and disclosure
             requirements for capital assets are applicable. (COD 1400.122 & GASB Q&A
             #Z.51) Commercial computer software generally qualifies as an intangible asset, as
             would an entity’s website (Q&A #Z.51.1 & Z.51.2). Land use rights (water, timber,
             mineral) are considered intangible only if acquired separately from the underlying
             property. (Q&A#Z.51.30))


                                                             -47-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. e.   Detailed Information on Assets – continued:

             (a) Beginning and ending balances, with accumulated depreciation presented
                 separately from historical cost? (Note: Depreciation of intangible assets is
                 termed “amortization”. Intangible assets with indefinite lives should not be
                 amortized. (COD 1400.122 & .134; see Q&A #Z.51.24 for discussion of
                 indefinite useful life.))

             (b) Capital acquisitions?

             (c) Sales or other dispositions?

             (d) Current-period depreciation expense, with disclosure of the amounts charged to
                 each of the functions in the statement of activities?

             (e) Are impairment losses, idle impaired capital assets, and insurance recoveries
                 disclosed appropriately? (COD 2300.107(gg); COD 1400.172, .175, & .176;
                 GUIDE-SLG 7.66 & 8.61) (Note: A general description of the impairment loss,
                 as well as the amount and financial statement classification (i.e., public works
                 or instruction) should be disclosed. Also, the carrying amount of impaired
                 capital assets idle at year-end, and the amount and financial statement
                 classification of insurance recoveries, should be disclosed.)

    f.   Detailed Information on Liabilities where appropriate: (COD 2300.901)

         (1) Payables: If significant payables are aggregated in the statement of net assets or the
             balance sheets and significant components of payables are obscured, are details of
             the aggregated totals disclosed? (COD 2300.119 & 2300.107(ff); GUIDE-SLG
             8.110) (Note: Disaggregation on the face of the fund financial statements would
             provide adequate disclosure. (GASBS 38, para. 54))

         (2) Construction and other significant commitments? (COD 2300.106(k), GUIDE-
             SLG 7.66)

             (a) If GASBS 54 Early Implemented: Significant encumbrances, by major funds
                 and nonmajor funds in the aggregate? (COD 1700.128, 1800.161 &
                 2300.106(k); GUIDE-SLG 11.09)

         (3) Claims and judgments? (COD C50.115) (See checklist items #65.q & r. also)

         (4) Capital Lease Obligations: (COD 2300.107(h) & L20.125; GUIDE-SLG 8.68 &
             7.66; FASB 13)

             (a) gross amount of assets recorded under capital leases as of balance sheet date?
                 (Note: This disclosure may be combined with comparable information for
                 owned assets.)

             (b) future minimum payments for each of 5 subsequent fiscal years and in five-year
                 increments thereafter?

         (5) Operating Leases Obligations: Significant operating lease commitments? (COD
             L20.125 & 2300.106(j); GUIDE-SLG 8.68, FASB 13)

             (a) for noncancelable operating leases - future minimum payments for each of 5
                 subsequent fiscal years and in five-year increments thereafter?


                                                             -48-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

         (6) Short-Term Debt (COD 2300.107(e) & .118; GUIDE-SLG 8.76 – 8.80 & 8.110)
             (Note 1: Accounting for debt is generally based on whether debt is short-term (i.e.,
             w/ original maturities of less than one year) or long-term, not on whether debt is
             current (i.e., due w/in one year of financial statement date) or noncurrent.)
             (Note 2: Short-term debt results from borrowings characterized by anticipation
             notes (i.e., revenue, tax, grant and bond (BANS) anticipation notes), use of lines of
             credit, and similar loans. Short-term debt is generally reported as a liability in the
             government-wide financial statements and in the financial statements of the fund
             receiving the proceeds. The issuance of debt and repayment of debt principal affect
             only the financial position statements; only the interest on the debt is reported in the
             activity statements.)
             (Note 3: If there is evidence that the government received a short-term loan
             during the audit period in anticipation of a Rural Development (USDA) loan, there
             should be disclosure of this arrangement.

             (a) If there is short-term debt activity during the year, a schedule of changes in
                 short-term debt, including beginning- and end-of-year balances, increases, and
                 decreases, and the purpose for which the short-term debt was issued? (Note:
                 These disclosures should be made, even though no short-term debt is
                 outstanding at year-end.) (COD 2300.118; GUIDE-SLG 8.110; See
                 Illustrations #8 & #9 at COD 2300.903)

             (b) If a short-term obligation (anticipation note) is excluded from fund or current
                 liabilities of a proprietary fund, is there a note describing the financing
                 agreement and the terms of any new obligations incurred or expected to be
                 incurred as a result of a refinancing? (COD 2300.107(p) & B50; GUIDE-SLG
                 8.79 & 8.80) (Note: Tax and revenue anticipation notes should be reported as
                 governmental fund liabilities in the fund receiving the proceeds, w/out regard to
                 whether the notes are ST or LT. In certain situations, BANS aren’t reported in
                 governmental funds.)

         (7) Long-Term Debt: (COD 2300.106(m), .107, .111, .114, .901; 1500.117 & .118)

             (a) description of individual bond issues and leases outstanding? (COD 2300.901)

             (b) Details about long-term liabilities, including: (COD 2300.114; GUIDE-SLG
                 8.111) (See illustrative disclosure at COD 2300.902, Note 2)
                 (Note 1: These details should be divided into major classes of LT liabilities as
                 well as between types of activity (governmental vs business-type), & should be
                 provided for LT liabilities ( compensated absences, claims & judgments) as well
                 as debt (bonds, notes, loans, leases). (COD 2300.111 & .114))
                 (Note 2: Compensated absences due within one year should be estimated, based
                 on historical trends or budgeted amounts. (GASB Q&A #7.22.4))

                 (1) Beginning and ending balances?

                 (2) Increases and decreases (separately presented)?

                 (3) Portions of each item that are due within one year of the statement date?
                     (Note: A liability for a net pension or OPEB obligation has no amount that
                     is due in one year. (GASB Q&A #7.22.6))

                 (4) Which governmental funds typically have been used to liquidate other LT
                     liabilities (such as compensated absences & pensions) in prior years?


                                                             -49-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

             (c) If the notes disclose that the entity has active* SRF & WRF loans from DNRC,
                 or Rural Development loans from the US Department of Agriculture, and if the
                 audit is conducted in accordance with Circular A-133, are these loans (i.e., the
                 federal portion of current-year draw-downs and prior-years’ outstanding
                 balances) included in the schedule of expenditure of federal awards?
                 (Note 1: *DNRC: If review of the audit report indicates that no DNRC loan
                 proceeds were received during the year, and that the associated construction is
                 complete, it would appear that the loan balance would no longer have to be
                 included on the federal schedule. Rural Development: RD exempts borrowers
                 from A-133 outstanding loan balance for determining expenditure of federal
                 awards – see Note 3, below.)
                 (Note 2: If necessary, verify the federal % of the loans with DNRC – some may
                 be 100% Federal or State, while others may be a combination of Federal &
                 State funding.)
                 (Note 3: Per Rural Development: RD has essentially made a loan guarantee
                 to the interim financing lender. As such, federal awards expended would
                 generally be when the interim financing funds are expended. The date of
                 RD’s approval letter may factor into when the interim financing is considered
                 federal.)

             (d) summary of debt service requirements to maturity? (COD 2300.106(i) &
                 1500.118; GUIDE-SLG 8.110)(See Illustration #7 at COD 2300.903)

                 (1) Principal and interest requirements to maturity, presented separately, for
                     each of the five subsequent fiscal years and in five-year increments
                     thereafter? (Note 1: Interest requirements for variable-rate debt should be
                     determined using the rate in effect at the financial statement date.) (Note 2:
                     Disclosures of principal requirements should be made separately from
                     disclosures of interest requirements, but there is no requirement to
                     separately disclose requirements of each debt issue. (GASB Q&A #7.85.7))

                 (2) The terms by which interest rates change for variable-rate debt?

             (e) bonds authorized but unissued? (COD 2300.901)

             (f) synopsis of significant revenue bond covenants, and violations thereof? (COD
                 2300.901)

                 (1) Revenues Pledged: If an enterprise fund sells bonds to construct a revenue
                     producing facility and secures the debt with a pledge of revenues generated
                     by that facility, are the following disclosures made for each period in which
                     the secured debt remains outstanding:? (COD 2300.107(jj); 2300.122;
                     S20.118; GASB Q&A #Z.48.9; GUIDE-SLG 6.85) (See COD S20.902,
                     Example 1 for illustrative disclosure.) (GASBS 48 – Sales and Pledges of
                     Receivables and Future Revenues…was effective for FY2008) (Note: These
                     disclosures not required for stand-alone BTA’s whose operations are
                     financed primarily by a single major revenue source. (COD S20, fn 5))

                     (a) Identification of the specific revenue pledged and the approximate
                         amount of the pledge (generally would be equal to the remaining
                         principal and interest requirements of the secured debt)?

                     (b) Identification of and general purpose for, the debt secured by the
                         pledged revenue??



                                                            -50-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

                      (c) The term of the commitment (i.e., the period during which the revenue
                          will not be available for other purposes?

                      (d) The relationship of the pledged amount to the total for that specific
                          revenue, if estimable (i.e., the proportion of the specific revenue stream
                          that has been pledged?

                      (e) A comparison of the pledged revenues recognized during the period to
                          the principal and interest requirements for the debt directly or indirectly
                          collateralized by those revenues? (Note: For this disclosure, pledged
                          revenues recognized during the period may be presented net of
                          specified operating expenses, based on the provisions of the pledge
                          agreement; however, the amounts should not be netted in the financial
                          statements.)

             (g) special assessment debt and related activities: (COD 2300.107(u), S40.126 &
                 .127; GUIDE-SLG 8.87 – 8.91)

                 (1) nature of the government’s obligation, including identifying any
                     arrangements to cover defaults by property owners? (Note: If the
                     government is obligated in some manner for the debt, it should disclose the
                     information required for long-term debt. If the government is not obligated
                     in any manner, the notes should disclose the amount of the debt and the fact
                     that the government is in no way liable for repayment. In such a case, the
                     special assessment debt should be reported only in an agency fund.)

                 (2) amount of delinquent special assessments receivable, if not separately
                     displayed on the face of the financial statements? (GUIDE-SLG 6.85)

             (h) debt refundings and extinguishments: (COD 2300.107(j), D20.111-115;
                 GUIDE-SLG 8.96 – 8.98)

                 (1) in the year of the refunding, a general description of an advance refunding
                     or current refunding on debt (general or proprietary fund debt)?, including:

                      (a) difference between cash flows required to service old debt and new
                          debt and complete the refunding?

                      (b) economic gain or loss resulting from the transaction?

                 (2) in periods following an advance refunding in which debt defeased in
                     substance remains outstanding, the amount of the in substance defeased
                     debt outstanding at year-end?

             (i)demand bonds? (COD 2300.107(v) & D30.111 & .112; GUIDE-SLG 8.86)

             (j) debt issued subsequent to the balance sheet date but before the date of the audit
                 report (i.e., subsequent event)? (COD 2300.106(e))




                                                             -51-
DESK REVIEW – 2010

REVIEW ITEM                                                                                          YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

         (8) Conduit Debt Obligations: If the entity has conduit debt obligations (e.g. industrial
             revenue bonds) are the following disclosures made: (COD C65.102 & 2300.107(z);
             GUIDE-SLG 8.92 – 8.93)

             (a) a general description of the conduit debt transactions?

             (b) the aggregate amount of all conduit debt obligations outstanding at the balance
                 sheet date? (Note: If the aggregate amount outstanding is not determinable or
                 cannot reasonably be estimated, issuers may provide the aggregate original
                 issue amount for conduit debt obligations issued prior to the implementation of
                 this section (GASB Interpretation 2). In this case the information should be
                 segregated between conduit debt obligations with the original issue amount
                 provided and those with the outstanding balance provided.)

             (c) a clear indication that the entity has no obligation for the debt beyond the
                 resources provided by related leases or loans?

         (9) Pension Plans:

             (a) For employers contributing to defined benefit plans, are the following required
                 disclosures made: (COD 2300.106(f) & .107(n) & P20.117; GUIDE-SLG 8.25)

                 (1) Name of the plan, identification of the PERS or other entity that administers
                     the plan, and identification of the plan as single-employer, agent multiple-
                     employer, or cost-sharing multiple employer defined benefit pension plan?

                 (2) Brief description of the types of benefits and the authority under which
                     benefit provisions are established or may be amended?

                 (3) Whether the pension plan issues a stand-alone financial report, or is
                     included in the report of a public employee retirement system or another
                     entity, and, if so, how to obtain the report?

                 (4) Authority under which the obligations to contribute to the plan of the plan
                     members, employer(s), and other contributing entities (for example, state
                     contributions to local government plans) are established or may be
                     amended?

                 (5) Required contribution rate(s) of active plan members?

                 (6) Required contribution rate(s) of the employer in accordance with the
                     funding policy, in dollars or as a % of current- year covered payroll and, if
                     applicable, the legal or contractual maximum contribution rates?

                 (7) For cost-sharing plans, required contributions in dollars and the % of that
                     amount contributed for the current & each of the two preceding years?

                 (8) For cost-sharing plans, how the required contribution rate is determined (for
                     example, by statute or contract, or on an actuarially determined basis) or
                     that the plan is financed on a pay-as-you-go basis.




                                                             -52-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

             (b) Are required disclosures for employers contributing to single-employer or agent
                 defined benefit plans or for employers contributing to defined contribution
                 pension plans made? (Note: Additional disclosures for employers contributing
                 to single-employer or agent defined benefit plans are at COD P20.117(b)(3) &
                 .118. Disclosures for employers contributing to defined contribution pension
                 plans are at COD P20.124)

         (10) On-Behalf Payments – Is there a disclosure of the amounts recognized for on-behalf
              payments for fringe benefits and salaries? (COD N50.134, 2300.106(g) &
              2300.107(y); GUIDE-SLG 6.85; GASB Q&A Section 8.46 and Z.24.1) (Note: It
              appears that State contributions for MPORS, FURS, PERS & TRS would qualify as
              on-behalf payments.)

         (11) OPEB - Post employment benefits other than pension benefits? (COD P50.120 &
              2300.107(o)):
             Note 1: See checklist item #60 for discussion regarding what constitutes OPEB.
             Note 2: The following requirements relate to disclosures for employers participating
             in all types of defined benefit plans. Additional disclosures for sole and agent
             employers can be found at COD P50.120(b)(3) and .121. See COD P50.127 for
             defined contribution plan note disclosures for employers.

             (a) Name of the plan, identification of the PERS or other entity that administers the
                 plan, and identification of the plan as a single-employer, agent multiple-
                 employer, or cost-sharing multiple-employer defined benefit OPEB plan?

             (b) Brief description of the types of benefits and the authority under which benefit
                 provisions are established or may be amended?

             (c) Whether the OPEB plan issues a stand-alone financial report or is included in
                 the report of a PERS or another entity, and, if so, how to obtain the report?

             (d) Authority under which the obligations of the plan members, employer(s), and
                 other contributing entities (for example, state contributions to local government
                 plans) to contribute to the plan are established or may be amended?

             (e) Required contribution rate(s) of plan members, expressed as a rate (amount) per
                 member or as a percentage of covered payroll?

             (f) Required contribution rate(s) of the employer in accordance with the funding
                 policy, in dollars or as a percentage of current-year covered payroll, and, if
                 applicable, legal or contractual maximum contribution rates?

             (g) For cost-sharing plans, the required contributions in dollars and the percentage
                 of that amount contributed for the current year and each of the two preceding
                 years, and how the required contribution rate is determined (for example, by
                 statute or by contract, or on an actuarially determined basis) or that the plan is
                 financed on a pay-as-you-go basis?




                                                              -53-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

         (12) Other employee benefits (COD 2300.901):

             (a) Section 457 or similar deferred compensation plans? (COD D25; GUIDE-SLG
                 8.18) (Note: GASBS 32 does not require specific note disclosures, although
                 disclosures may be made to describe provisions of the plan. Eligible plans now
                 require that assets and income be held in trust for the exclusive benefit of the
                 participants and their beneficiaries, and are no longer considered to be assets of
                 the employer. (GASBS 32, para. 1)

             (b) Termination benefits - (Benefits provided in exchange for early termination of
                 services) (COD 2300.107(ii) & T25.114 - .117; GASB Q&A Z.47):
                 (Note 1: GASBS 47 is effective (a) for termination benefits that affect an
                 employer’s obligations for defined benefit OPEB, simultaneously with GASB
                 34,(e.g., phase-in periods of FY2008, FY2009 & FY2010) and (b) FY2006 for
                 all other termination benefits.)
                 (Note 2: COBRA is a termination benefit – Q&A #Z.47.1)

                 (1) A description of the termination benefit arrangements (i.e., types of benefits
                     provided, number of employees affected, and period of time over which
                     benefits will be provided)?

                 (2) The cost of termination benefits, if not otherwise displayed on the face of
                     the financial statements?

                 (3) The significant methods and assumptions used to determine the liabilities?

                 (4) If a termination benefit is not recognized because the expected benefits are
                     not estimable, a statement to that effect?

         (13) Closure & Postclosure Obligations: Disclosures for solid waste landfill closure
              and postclosure costs, as follows: (COD L10.115 & 2300.107(w)) (Note: The
              following entities should have landfill note disclosures: Cities: Big Timber,
              Billings, Bozeman, Chester, Glendive, Hardin, Helena, Jordan, Malta, Shelby Wolf
              Point; Counties: Beaverhead, Butte-SilverBow, Custer, Daniels, Fallon (Coral
              Creek Landfill), Flathead, Gallatin (may have 2 – County Landfill & West
              Yellowstone Hebgen Basin Compost System), Hill (Unified Disposal District), Lake,
              Lewis & Clark, Lincoln, Park, Powder River, Powell, Richland, Rosebud, Sheridan,
              Valley; Districts: Northern Montana Joint Refuse Disposal District)

             (a) The nature and source of landfill closure and postclosure care requirements
                 (federal, state, or local laws or regulations)?

             (b) That recognition of a liability for closure and postclosure care costs is based on
                 landfill capacity used to date?

             (c) The reported liability for closure and postclosure care at the balance sheet date
                 (if not apparent from the financial statements) and the estimated total current
                 cost of closure and postclosure care remaining to be recognized?

             (d) The percentage of landfill capacity used to date and estimated remaining landfill
                 life in years?



                                                             -54-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. f.   Detailed Information on Liabilities – continued:

             (e) How closure and postclosure care financial assurance requirements, if any, are
                 being met. Also, any assets restricted for payment of closure and postclosure
                 care costs (if not apparent from the financial statements)?

             (f) The nature of the estimates and the potential for changes due to inflation or
                 deflation, technology, or applicable laws or regulations?

    g.   Interfund Balances: Details about interfund balances reported in the fund financial
         statements, including: (COD 2300.106(o) & 120; GUIDE-SLG 9.13) (Note: See COD
         S20.112 & GUIDE-SLG 9.21 – 9.25 for information related to intra-entity [between
         primary government and DPCU] balances.)

         (1) Amounts due from other funds by individual major fund, nonmajor governmental
             funds in the aggregate, nonmajor enterprise refunds in the aggregate, internal service
             funds in the aggregate, and fiduciary fund type?

         (2) The purpose for interfund balances?

         (3) Interfund balances that are not expected to be repaid within one year from the date of
             the financial statements? (Note: If repayment isn’t expected within a reasonable
             time, interfund balances should be reclassified as interfund transfers. (GUIDE-SLG
             9.08 & 9.33; GASB Q&A #7.82.1))

    h.   Interfund Transfers: Details about interfund transfers reported in the fund financial
         statements, including: (COD 2300.106(o) & 121; GUIDE-SLG 9.14) (Note: See COD
         S20.112 & GUIDE-SLG 9.21 – 9.25 for information related to intra-entity [between
         primary government and DPCU] activity.)

         (1) Amounts transferred from other funds by individual major fund, nonmajor
             governmental funds in the aggregate, nonmajor enterprise funds in the aggregate,
             internal service funds in the aggregate, and fiduciary fund type?

         (2) A general description of the principal purposes of the government’s interfund
             transfers?

         (3) The intended purpose and the amount of significant transfers that: (1) do not occur
             on a routine basis and/or (2) are inconsistent with the activities of the fund making
             the transfer?

    i.   Equity:

         (1) Pre GASBS 54: If not reported on the face of the governmental funds balance sheet,
             the nature and purpose of any: (2009-2010 COD P70.109; GAAFR, page 234)

             (a) Fund balance reservations?

             (b) Fund balance designations? (2009-2010 COD 1800.144 & 2300.107(l);
                 GUIDE-SLG 10.23) (Note: Although designations of net assets should not be
                 reported in the government-wide or proprietary fund statements of net assets ,
                 they may be disclosed in the notes. (2009-2010 COD 1800.141; GUIDE-SLG
                 10.05 & 10.08))




                                                             -55-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. i.   Equity – continued:

         (2) Pre GASBS 54: Outstanding encumbrances? (2009-2010 COD 1700.128 &
             2300.106(e); GUIDE-SLG 11.09) (Note: Disclosure OR reservation of fund balance
             required.)

         (3) Internal Service Fund: If an internal service fund is used to account for risk
             financing activities are the following disclosures made: (COD C50.128 & 129;
             GUIDE-SLG 8.64 & 9.15)

             (a) deficit fund balances?

             (b) designations of net assets resulting from charging a reasonable provision for
                 expected future catastrophe losses? (Note: See GASB Q&A #7.47.21 for
                 discussion of elimination of these accumulated resources as part of the “look
                 back” process for internal service funds.)

         (4) Enabling Legislation: Is the amount of net assets at year-end that is restricted by
             enabling legislation, if any, disclosed? (COD 1800.134, 2200.119 & 2300.107(hh);
             GUIDE-SLG 10.23; Q&A #7.24.16)

         (5) If GASBS 54 is early implemented: Fund balance classification details, including:
             (COD 1800.160 & 2300.107(l))

             (a) For committed fund balance: (1) the government’s highest level of decision-
                 making authority and (2) the formal action that is required to be taken to
                 establish (and modify or rescind) a fund balance commitment?

             (b) For assigned fund balance: (1) the body or official authorized to assign amounts
                 to a specific purpose and (2) the policy established by the governing body
                 pursuant to which that authorization is given?

         (6) If GASBS 54 is early implemented: If nonspendable, restricted, committed, and
             assigned fund balance classifications are presented in the financial statements in the
             aggregate: (COD 1800.159 & .162)

             (a) Are amounts for the two nonspendable components disclosed?

             (b) Are major specific purposes for the restricted, committed and assigned
                 classifications disclosed?

         (7) If GASBS 54 is early implemented: If a government has established stabilization
             arrangements, the related policies? (See detailed disclosures required at COD
             1800.163) (COD 2300.107(nn))

         (8) If GASBS 54 is early implemented: If a government has formally adopted a
             minimum fund balance policy, a description of that policy? (COD 1800.164 &
             2300.107(oo)) (See GASB Q&A #Z.54.23 for discussion of the difference between
             a stabilization arrangement and a minimum fund balance policy.)

         (9) If GASBS 54 is early implemented: The purpose for each major special revenue
             fund – identifying which revenues and other resources are reported in each of those
             funds? (COD 1300.105 & 2300.107(pp))




                                                             -56-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

65. j. Donor-Restricted Endowments: (COD 2300.106(q) & 2300.117; GUIDE-SLG 5.44):

        (1) The amounts of net appreciation on investments of donor-restricted endowments that
            are available for authorization for expenditure by the governing board, and how
            those amounts are reported in net assets?

        (2) The State law regarding the ability to spend net appreciation?

        (3) The policy for authorizing and spending investment income, such as a spending-rate
            or total-return policy?

   k.   Unusual or Infrequent But Not Within Management Control: A disclosure of any
        significant transactions or other events that are either unusual or infrequent but not within
        the control of management (i.e. that do not meet the definition of “special items”)?
        (COD 2300.107(cc) & 2200.144 & .162; GUIDE-SLG 6.85)

   l.   Segment Information for enterprise funds, by identifying the types of goods and
        services provided, including: (COD 2500.101, 2300.107(c), & 1500.117) (See COD
        2500.101 for elements to be disclosed & illustrative disclosure at COD 2500.901)
        (Note: For this purpose, a segment is an identifiable activity reported as or within an
        enterprise fund or an other stand-alone entity that has one or more bonds outstanding,
        with a revenue stream pledged in support of that debt and an externally imposed
        requirement for the activity’s revenues, expenses, etc. to be accounted for separately.
        Segment disclosures are not required for an activity whose only outstanding debt is
        conduit debt (i.e., segment disclosures are not required when there is no revenue-backed
        debt) or when an individual fund is both a segment and reported as a major fund. (COD
        2500, fn 1; GASB Q&A #7.86.1 & #7.86.5))

   m. Major DPCU: Required condensed financial statements for all “major” discretely
      presented component units? (COD 2300.107(d), 2600.108 - .111; GUIDE-SLG 3.19)
      (Note: If the major and nonmajor DPCU’s are presented as one total in the GPFS, the
      notes must disclose the condensed financial information for the major component units
      and only the aggregate information for the nonmajor component units. (For other options
      see checklist item #63.))

        (1) For each major component unit, is the nature and amount of significant transactions
            with the primary government and other component units disclosed? (COD 2600.110
            & 2300.106(p))

   n.   Related Organizations: A disclosure of the primary government’s accountability for
        related organizations, if applicable, and any related party transactions with its related
        organizations? (COD 2300.107(g), 2600.127; GUIDE-SLG 3.23) (Note: Organizations
        for which a primary government is accountable because that government appoints a
        voting majority of the board, but is not financially accountable, are related
        organizations.)

   o.   Related Party Transactions? (COD 2300.107(f) & 2250.102 - .105; GUIDE-SLG 4.45
        & 13.13 – 13.15) (Note 1: AU §334 discusses the auditor’s responsibilities with respect
        to related party transactions; GASBS 56, effective FY2009, requires governments to
        evaluate and report related party transactions.) (Note 2: See COD 2250.102 - .105 for
        discussion of “form-over-substance”.)




                                                             -57-
DESK REVIEW – 2010

REVIEW ITEM                                                                                                 YES   NO   N/A   REF

65. p.   Joint Ventures and Jointly Governed Organizations? (COD 2300.107(i), J50.102,
         109, & .111) (Note: A jointly governed organization provides goods or services to the
         citizenry of two or more governments, as does a joint venture, but there is no ongoing
         financial interest or responsibility by the participating governments. Only the disclosure
         in (4), below, is required for a jointly governed organization.)

         (1) Do all situations described in the notes meet the definition of a joint venture? (Note:
             Participation in a public sector risk pool is not considered to be participation in a
             joint venture. (GASBS 14, para. 79; GASB Int. 4, para. 26))

         (2) Is there a general description of each joint venture, including a description of the
             participating government’s ongoing financial interest (including its equity interest, if
             applicable) or ongoing financial responsibility? (Note: This disclosure should also
             include information to allow the reader to evaluate whether the joint venture is
             accumulating significant financial resources or is experiencing fiscal stress that may
             cause an additional financial benefit to or burden on the participating government in
             the future.)

         (3) Is there information about the availability of separate financial statements of the joint
             venture?

         (4) Is there information on any related party transactions? (Note: This disclosure is
             required for both joint ventures and jointly governed organizations.)

    q.   Risk Financing: Disclosures for risk financing and insurance-related activities as
         follows: (COD 2300.107(a), C50.145, .115 and .146; GUIDE-SLG 8.64)

         (1) A description of the risks of loss to which the entity is exposed and ways in which
             those risks of loss are handled?

         (2) A description of significant reductions in insurance coverage from coverage in the
             prior year by major categories of risk, and whether the amount of settlements
             exceeded insurance coverage for each of the past three fiscal years?

         (3) If the entity participates in a risk pool, a description of the nature of the participation,
             including the rights and responsibilities of both the entity and the pool?

         (4) If the entity retains the risk of loss:

             (a) The basis for estimating the liabilities for unpaid claims including the effects of
                 specific, incremental claim adjustment expenditures/expenses, salvage, and
                 subrogation, and whether other allocated or unallocated claim adjustment
                 expenditures/expenses are included?

             (b) The carrying amount of liabilities for unpaid claims that are presented at present
                 value in the financial statements and the range of discount rates used to discount
                 those liabilities?

             (c) The aggregate outstanding amount of claims liabilities for which annuity
                 contracts have been purchased in the claimants’ names and for which the related
                 liabilities have been removed from the balance sheet?

             (d) A reconciliation of changes in the aggregate liabilities for claims for the current
                 fiscal year and the prior fiscal year, in a tabular format (see COD C50.145.d(4))




                                                                -58-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

65. q.   Risk Financing - continued:

         (5) A description of any exposure to loss that is not accrued but for which there is a
             reasonable possibility of a loss? (COD C50.115; GUIDE-SLG 8.64)

         (6) A description of any subsequent events that involve risk of loss? (C50.149)

    r.   Contingent Liabilities: Other significant contingent liabilities not requiring accrual–
         (COD 2300.106(d), 1500.114 & C50.115; GUIDE-SLG 8.64)

         (1) Litigation?

         (2) Federal assisted programs – compliance audits? (GUIDE-SLG 6.34)

         (3) If proprietary or trust fund liabilities for which the government is contingently liable
             are in default, or if default is imminent, is the situation disclosed? (GUIDE-SLG
             8.109)

    s.   If the entity sells future revenue streams, are appropriate disclosures made (COD
         S20.119; GUIDE-SLG 6.85)? (Note: See checklist item #65.f.(7)(f)(1) for disclosures
         for pledges of revenue.)

    t.   Pollution Remediation Obligations? (COD P40.123 & .124; 2300.107(x); GUIDE-
         SLG 8.51 – 8.55) (GASBS 49, Accounting and Financial Reporting for Pollution
         Remediation Obligations, is effective for FY2009). (Note: Pollution remediation outlays,
         including property, plant, and equipment, should be reported as an expense when a
         liability is recognized. Exception: In certain circumstances, as noted at COD P40.120,
         pollution remediation outlays should be capitalized.)

    u.   Subsequent Events: Significant effects of subsequent events? (COD 2300.106(e) &
         2250.106 - .113; GUIDE-SLG 8.110 & 13.26 – 13.35; AU §560)
         (Note 1: AU §560 discusses the auditor’s responsibilities with respect to subsequent
         events; GASBS 56, effective FY2009, requires governments to evaluate and report
         subsequent events.)
         (Note 2: “Subsequent events” are events or transactions that occur subsequent to the
         balance-sheet date, but prior to the issuance of the financial statements, for which
         management is required to either adjust the financial statements or provide disclosure.
         The “subsequent period” is the period after the balance-sheet date through to the date of
         the auditor’s report. The auditor is responsible for performing audit procedures for this
         period to evaluate subsequent events for fair presentation in the financial statements. As
         such, late issuance of either the annual financial report or the audit report exposes the
         entity and/or auditor to additional responsibility for subsequent events.)
         (Note 3: See COD 2250.106 - .113 for discussion of recognized events (subsequent
         events that require adjustments to the financial statements) and nonrecognized events
         (subsequent events that may require disclosure). Examples of nonrecognized events that
         may require disclosure include issuance of bonds, creation of new component unit, loss
         of a facility, etc. (COD 2250.111))




                                                              -59-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

65. v.   Other: Is there adequate disclosure of other material matters: (COD 2300.102 and .108,
         AU 431.02)

         (1) Accounting changes affecting consistency, and prior period adjustments/restatements
             of equity?
             (Note 1: Items that should be disclosed are (1) a change in financial reporting entity
             (GUIDE-SLG 3.36; GASB Q&A #4.38.3), (2) a change in accounting estimate
             having a material effect on the financial statements (AU 420.15), (3) material
             reclassifications (AU 420.17) & (4) error corrections (GASB Q&A #7.22.16). See
             also matters discussed at AU 420 .19 & .20.
             (Note 2: Corrections of an error should be reported either by displaying the amount
             on the face of the statement as an adjustment to “beginning net assets/fund balance,
             as previously reported”, OR by displaying “beginning net assets/fund balances, as
             restated”, with an explanation of the restatement in the notes to the financial
             statements. (Q&A #7.22.16))

         (2) If prior-period information is presented in partial or summary form and does not
             include the minimum information required by GAAP, a statement describing the
             prior-period presentation? (GUIDE-SLG 2.54)
             (Note 1: This would be applicable when a government presents prior-year data only
             for GW but not fund statements, or presents data in the GW statements for only the
             total reporting entity rather than disaggregated in columns as required by GAAP.)
             (Note 2: If this disclosure is omitted or incomplete, the auditor should add a
             paragraph to his report related to the situation. This paragraph should follow the
             opinion paragraph and should not be referred to in the scope or opinion paragraphs.
             See example at GUIDE-SLG 14.38)
             (Note 3: Labeling the prior period information “for comparative purposes only”
             doesn’t constitute appropriate disclosure, although financial statements titled “with
             partial/summarized financial information for the year ended June 30, 20PY” may be
             adequate (consider COD 2300.103).)

         (3) Discontinued operations?

         (4) Significant budget and actual variances?

         (5) Items material to individual discretely presented component units, considering both
             the unit’s significance relative to the total discretely presented component units and
             the nature and significance of the unit’s relationship to the primary government?
             (COD 2600.121 & .122; GASB Q&A #4.39.1; GUIDE-SLG 3.21)

         (6) Going concern considerations? (COD 2300.107(ll) & 2250.114 - .117; GUIDE-SLG
             13.16 – 13.25)
             (Note 1: AU §341 discusses the auditor’s responsibilities with respect to going
             concern; GASBS 56, effective FY2009, requires governments to evaluate and report
             going concern considerations.)
             (Note 2: The auditor has a responsibility to evaluate the government’s ability to
             continue as a going concern for a reasonable period of time, not to exceed one year
             beyond the date of the financial statements being audited. (AU §341.02))

             (a) Required disclosures about bankruptcies? (GASBS 58, effective FY2010; COD
                 2300.107(mm) & Bn5; GUIDE-SLG, 8.110 & 13.21).)

         (7) Other material matters?




                                                              -60-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

66. If the audit is a biennial audit, are required note disclosures made for significant balances and
    transactions applicable to each fiscal year? (SAC para. 8.d.))
         (Note: Disclosures that should be made include, but are not limited to, the areas of
         cash/investments, capital assets, long-term liabilities, and interfund balances/transfers.)

67. Do note disclosures reflect current State law? (Examples: budget laws, retirement
    contribution rates, FDRA laws, etc.)

68. Are the footnotes presented in a logical order? (COD 2300.109) (Note: COD 2300.901
    contains an outline that is intended to provide guidance for the sequence of notes to the
    financial statements. This guidance should not be considered as supplanting the judgment of
    the auditor in determining the most meaningful method of presenting the necessary notes to
    the financial statements information.)

69. Are the notes free of unnecessary and immaterial disclosure? (COD 2300.108)

70. Are the notes free of disclosures indicating any condition that negatively affects State
    programs or federal programs passed through State agencies or that should be reported to
    State officials?

Required Supplementary Information Other Than MD&A

71. Is RSI other than MD&A presented immediately following the notes to the financial
    statements? (COD 2200.181; GUIDE-SLG 2.50)

72. Budgetary Comparison Schedules: (See illustrative schedules at COD 2400.903, Exhibits
    G-1 through G-4)
    (Note: Governments may elect to report this same budgetary comparison information in a
    budgetary comparison statement as part of the basic financial statements, rather than as RSI.
    (COD 2200.182, footnote 37; GUIDE-SLG 2.48 & 11.13) If reported in this manner, the
    budgetary comparison statement should be presented with the fund financial statements, after
    the governmental funds’ statement of revenues, expenditures and changes in fund balances.
    (GASB Q&A #7.91.8))

    a.   Is a budgetary comparison provided for the general fund and for each major special
         revenue fund that has a legally adopted annual budget? (COD 2200.182; GUIDE-SLG
         11.03)
         (Note 1: The budgetary comparison may be presented using the format, terminology and
         classifications found in the budget document or in the GAAP operating statement. (COD
         2200.183; GASBS 34, para. 452))
         (Note 2: If a budget is not adopted for the general or a major special revenue fund
         because it is not legally required, that situation should be disclosed in the notes to RSI.
         (GUIDE-SLG 11.16 & 14.57))
         (Note 3: If a special revenue fund that does not meet the major fund criteria is
         voluntarily reported as a major fund in the fund financial statements, a budgetary
         comparison is also required of the fund. (GASB Q&A #7.91.2))
         (Note 4: Governments that are not able to present these budgetary comparisons because
         of perspective differences should present budgetary comparison schedules based on the
         fund, organization, or program structure that the government uses for its legally adopted
         budget (comparisons should be presented for the activities reported in the general and
         each major special revenue fund). (COD 2400.102))




                                                              -61-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

72. Budgetary Comparison Schedules – continued:

    b.   Does the Schedule present both (a) the original and (b) the final appropriated budgets as
         well as (c) actual inflows, outflows, and balances, stated on the government’s budgetary
         basis? (Note: A separate column to report the variance between the final budget and
         actual amounts is encouraged, but not required. The variance between original and final
         budgets may also be reported) (COD 2200.182; GUIDE-SLG 11.03)

    c.   Is the Schedule accompanied by information (either in a separate schedule or in notes to
         RSI) that reconciles budgetary information to GAAP information?
         (Note 1: If the budgetary comparison information is included in the basic statements,
         these disclosures should be in the notes to the financial statements, rather than as notes
         to RSI.) (COD 2200.183; GUIDE-SLG 11.14)
         (Note 2: See GUIDE-SLG 11.10 & GAAFR pgs. 175 & 176 for discussion of
         encumbrance accounting.)

    d.   Do Notes to RSI disclose (1) the budgetary basis of accounting, and (2) any excesses of
         expenditures over appropriations in individual funds presented in the comparison (based
         on the legal level at which budgetary control is exercised) presented in the budgetary
         comparison? (COD 2400.103; GUIDE-SLG 11.14) (Note: If the excess is considered to
         be a material violation of finance-related legal provisions, a disclosure in the notes to the
         basic financial statements is required. (GASB Q&A #7.93.2; GUIDE-SLG 11.15))

73. Actuarial information for pension plans required for sole and agent employers? (COD
    P20.119)

74. Actuarial information for OPEB plans required for sole and agent employers? (COD
    P50.122) (Note: It appears that the local governments participating in the OPEB plans with
    MMIA, MACo and MUST would be considered to be agent employers.)

    a.   For the most recent and the two preceding actuarial valuations:
         (Note 1: Until three actuarial valuations have been performed, the required information
         should be presented for as many years as it is available. (COD P50.122, footnote 23))
         (Note 2: For agent employers, the requirements apply to the employer’s individual plan.
         (COD P50.121. footnote 21))

         (1) Information about the funding progress of the plan, including the actuarial valuation
             date, the actuarial value of assets, the actuarial accrued liability, the total unfunded
             actuarial liability (or funding excess), the actuarial value of assets as a percentage of
             the actuarial accrued liability (funded ratio), the annual covered payroll, and the ratio
             of the unfunded actuarial liability (or funding excess) to annual covered payroll?

         (2) Factors that significantly affect the identification of trends in the amounts reported,
             including, for example, changes in benefit provisions, size or composition of the
             population covered by the plan, or the actuarial methods and assumptions used?

    b.   For cost-sharing employers - If the plan in which an employer participates does not make
         publicly available a stand-alone plan financial report prepared in accordance with COD
         Po50, and the plan is not included in the financial report of a PERS or another entity -
         schedules of funding progress and employer contributions for the plan (and notes to these
         schedules), prepared in accordance with Section Po50 and presented as RSI in its own
         financial report? (COD P50.123) (Note: This should include a disclosure that the
         information presented relates to the cost-sharing plan as a whole, of which the employer
         is one participating employer, and information should be provided to enable a reader to
         understand the scale of the information presented relative to the employer.)


                                                              -62-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES       NO      N/A      REF

75. Do the RSI schedules not contain additional information that is not required? (GUIDE-SLG
    14.55 & 11.12; GASB Q&A #7.91.5 & #7.91.6)
    (Note 1: The nature of RSI does not permit governments to voluntarily expand the contents of
    RSI beyond the required elements. Additional budgetary comparison information (for
    instance, for nonmajor special revenue funds or for capital projects or debt service funds)
    may be presented as SI but not as RSI. A government may, however, provide additional
    details about the required elements within the RSI schedules)
    (Note 2: – The consequence of presenting additional special revenue funds in the budgetary
    comparison schedule is that those funds are subject to all major fund reporting requirements.)

Supplemental Information (SI)
The Standard Audit Contract requires that the auditor report on all supplemental schedules and information presented in the audit
report, including the supplemental schedules of extracurricular activities and enrollment, and the schedule of expenditures of federal
awards. (SAC, para. 9.d & 10.b.) As such, there should be an “in relation to” opinion or disclaimer of opinion rendered on all
supplementary information.

76. School District Supplemental Schedules:

    a.   Extracurricular: Does the report include a detailed schedule of extracurricular fund
         financial activities as a supplemental schedule, if applicable? (SAC, para 11.b.)

         (1) If the supplemental schedule of extracurricular activities indicates that accounts are
             maintained within the extracurricular funds for scholarships or other purposes that
             are not student-oriented, and if this noncompliance is significant, is there a related
             audit finding?
             (Note 1: OPI’s Montana School Accounting Manual indicates that student
             scholarships should be reported in private purpose trust funds #81 (non-expendable)
             or #85 (expendable). Scholarships that support district programs should be reported
             in Fund #15, Miscellaneous Programs Fund, a non-budgeted special revenue fund.)
             (Note 2: The MASBO Student Activity Manual includes a listing of receipts that
             should not be deposited into the extracurricular fund, including hot lunch
             collections, school facility rentals, insurance reimbursements, driver education fees,
             faculty funds, booster club and PTO funds, district petty cash funds, and book fines.)

         (2) Does information reported in the supplemental schedule agree to the extracurricular
             fund information reported in the basic financial statements (fiduciary fund
             statements)? (AU §551.05 (SAS 119) – When an “in relation to” opinion on
             supplemental information is given, the auditor must determine that the SI was
             derived from, and related directly to, the underlying accounting and other records
             used to prepare the financial statements.) (Note: Differences may result from (1)
             basis of accounting differences (i.e., the SI may be presented on a cash basis, while
             fiduciary funds are reported on the accrual basis), OR (2) interim accounting in the
             extracurricular fund records may be removed for appropriate reporting in the basic
             financial statements (e.g. lunch collections may be recorded within the
             extracurricular fund depository account on an interim basis, but the related activity
             should be removed prior to reporting in the basic financial statements to avoid
             double reporting of the activity in the special revenue school lunch fund and in the
             extracurricular fund.) It is preferable that a reconciliation between the SI and the
             fiduciary funds be included in the supplemental schedule. If not, and the difference
             is material, the reviewer may wish to contact the auditor to obtain the
             reconciliation.)

    b.   Enrollment: Does the report include a supplemental schedule of enrollment, and does
         the schedule contain the enrollment both as reported in the Fall and Spring enrollment
         reports and as documented by the school district's records? (SAC, para 11.a.)



                                                              -63-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

76.        School District Supplemental Schedules - continued:
           (1) If the supplemental schedule of enrollment indicates any variance between the
               enrollment reports and the school district’s records, is there an audit finding related
               to the variance, with a recommendation that the district file an amended enrollment
               report to OPI? (Note: OPI considers any enrollment difference to be material.)

77. Schedule of Expenditures of Federal Awards (SEFA): If an A-133 audit, does the report
    include a SEFA, and does it contain the following: (A-133 §.310(b); SAC, para 10.a.;
    GUIDE-GAS/A-133, Chapter 7)

      a.   Individual federal programs listed by federal agency? (Note: Federal programs included
           in a cluster of programs should be listed individually also.)

      b.   If the entity is a subrecipient of federal awards, the name of the pass-through entity and
           the identifying number assigned by the pass-through entity?

      c.   The CFDA number, or other identifying number when the CFDA information is not
           available?

           (1) School Commodities: Is CFDA No. 10.550 NOT reported?
               (Note: Effective May 2008, CFDA #10.550 was removed from the Catalog of
               Domestic Assistance. The USDA considers commodities to be an integral part of the
               categorical programs under which USDA makes them available, and should be
               identified with those programs. The categorical programs under which commodities
               should be reported are 10.555, 10.558, 10.559, 10.565 & 10.567.
               Please go to OPI’s website for discussion of this change in SEFA reporting for
               Commodities:
               http://www.opi.mt.gov/pdf/schoolfinance/Audit/Delete_CFDANum_Comm.pdf

      d.   Separate reporting of American Recovery and Reinvestment Act (ARRA) funds? (Note:
           Recovery Act funds are required to be identified separately in any reporting (including
           the SEFA & the Data Collection Form). This separate identification is applicable
           regardless of whether the funds are granted under a new or existing CFDA number, and
           regardless of whether the funds are used in conjunction with other funds to complete
           projects. (GUIDE-GAS/A133, 6.71 & 6.72; 7.22 – 7.24; A-133 Compliance Supplement
           2010, Appendix 7))

      e.   The program or award amount? (required by SAC only)

      f.   The cash/fund balance of each program at the beginning of the audit period? (SAC only)

      g.   Federal receipts/revenues for each program for the audit period? (SAC only)

      h.   Other receipts or revenues for each program? (e.g. program income, matching funds,
           other) (SAC only)

      i.   The total federal awards expended for each individual federal program, and the total non-
           federal awards expended for each program, if applicable and if determinable? (Note: If
           there is no matching or program income, a “total expenditures” column is acceptable.
           However, if there is matching or program income, there should be a separate column
           specifically for “federal expenditures” and another column for “non-federal
           expenditures”. The “non-federal expenditures” column is required by SAC only.)




                                                                -64-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

77. Schedule of Expenditures of Federal Awards (SEFA) - continued:
    j.   The cash balance or fund balance of each program at the end of the audit period?
         (required by SAC only)

    k.   Notes which describe the significant accounting policies used in preparing the schedule?

    l.   To the extent practical, an identification of the total amount provided by pass-through
         entities to subrecipients from each federal program?

    m. The value of federal awards expended in the form of non-cash assistance, the amount of
       insurance in effect during the year, and loans or loan guarantees outstanding at year-end?
       (Note 1: This information may be included in either the schedule or a note to the
       schedule. While not required, it is preferable to present this information in the schedule.)
       (Note 2: The value of new loans received during the year, plus balances of loans from
       previous years with continuing compliance requirements (other than pay-back) are
       considered to be federal “expenditures” for purposes of the federal awards schedule. (A-
       133 §.205))

    n.   If non-federal data are presented in the Schedule of Federal Awards Expended, are the
         non-federal data clearly designated as such, and has the title of the Schedule been
         modified accordingly? (GUIDE GAS/A133, 7.13)

    o.   If a biennial audit: Is federal program activity of both years included on the Schedule of
         Federal Awards Expended? (Note: The determination of Type A & Type B programs,
         and the percentage-of-coverage rule, are based on federal awards expended during the
         two-year period.) (A-133 §.220 & §.520(b)(4))

78. Housing Authority Financial Data Schedule: If this is a public housing authority, does the
    report include the Financial Data Schedule (FDS)? (Note: HUD requires financial
    information to be electronically submitted to HUD. HUD requires a copy of the submission
    to be included in the audit report as SI and the auditor to attest to its fair presentation as it
    relates to the basic financial statements. HUD also requires a PHA to obtain an agreed-upon
    procedures engagement in which the auditor compares the electronically submitted data to
    the hard copies of the audit report and FDS.) (GUIDE SLG-12.26)

79. Statistical Section – If the audit report contains a statistical section, does it contain
    information presented in the five categories of (1) financial trends information, (2) revenue
    capacity information, (3) debt capacity information, (4) demographic and economic
    information, and (5) operating information? (COD Section 2800)
    (Note 1: GASBS 44 is applicable to not only the statistical section of a CAFR, but also to any
    “statistical section” that accompanies the basic financial statements. If some, but not all, of
    the required statistical section information is included as supplemental information, it should
    not be referenced as a “Statistical Section”. (COD 2800.101, GASB Q&A #9.2.4)
    (Note 2: Data should be presented for the most recent 10 years (COD 2800.106). First-time
    preparers are encouraged, but not required, to report all required years of information
    retroactively. (GASBS 44, para. 43))

80. If the audit report contains combining statements or other SI, is the information materially
    consistent with the related information reported in the basic financial statements? (GUIDE-
    SLG 14.60 – 14.62; AU §551) (Note: GASBS 34 limits the combining statement requirement
    for CAFR’s to nonmajor, internal service & fiduciary funds). (COD 2200.184; GASB Q&A
    #7.48.2))




                                                              -65-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO       N/A      REF

Compliance and Internal Control Reports in Accordance with Government Auditing Standards (GAS)
   Auditors are required by GAS, when auditing the financial statements of the entity, to also report on internal control over
    financial reporting and on compliance with laws, regulations and provisions of contracts or grant agreements. This reporting may
    be included in the report on the financial statements, or it may be presented in separate report(s). When reporting separately, even
    in the same document, auditors should state in the report on the financial statements that they are issuing those separate reports.
    (GAS 5.07 – 5.09)
   Illustrative reports which combine the reporting on internal control over financial reporting with the reporting on compliance with
    laws, regulations, and provisions of contracts or grant agreements with can be found in GUIDE-GAS/A-133, 4.51, Examples 4-3
    through 4-7. The AICPA recommends that these combined reports be used (GUIDE-GAS/A-133, 4.27), and no longer provides
    examples of separate reports on compliance and internal control.
   SAS 115 (AU 325), effective for periods ending on or after December 15, 2009 (FY2010), supersedes SAS 112. It defines
    the terms deficiency in internal control, significant deficiency, and material weakness, and provides guidance on evaluating
    the severity of deficiencies in internal control identified in an audit of financial statements. It also requires the auditor to
    communicate, in writing, to management and those charged with governance, significant deficiencies and material
    weaknesses identified in an audit.

81. Does the “Report on Internal Control Over Financial Reporting and on Compliance and Other
    Matters Based on an Audit of Financial Statements Performed in Accordance With
    Government Auditing Standards” include the following elements: (GUIDE-GAS/A-133, 4.28
    and 4.51, Examples 4-3, 4-5, & 4-7; SAS 115, AU 325))
    (Note 1: The following elements of the internal control and compliance report have been
    updated for SAS 115 (AU 325) and the most current revision of the GUIDE-GAS/A-133.
    (There are minor differences between illustrative wording presented in the GUIDE and
    illustrative wording presented in AU 325 – either format is acceptable.) Circular A-133 has
    been updated (June 2007) to replace the term “reportable condition” with “significant
    deficiencies”, to conform to these standards. Until GAO issues its revised Government
    Auditing Standards (expected to be issued in early 2011), it has issued interim guidance,
    indicating that the reporting requirement of GAS 5.11 may be met by following the
    definitions and requirements from SAS 115.
    (Note 2: Other Auditors: GUIDE-GAS/A133 indicates that a principal auditor who refers to
    the work of other auditors in the report on an entity’s financial statements also should
    acknowledge the involvement of the other auditors in this report. The principal auditor has
    two options for making such an acknowledgment: the reference option and the inclusion
    option. The GUIDE recommends that only one option be used in a report (that is, not
    referencing the results of some other auditors’ work and including the results of others).
    Regardless of which of the options is chosen, the principal auditor is not responsible for the
    specific findings of the other auditors. (GUIDE-GAS/A133, 4.43 & 4.44) See GUIDE-
    GAS/A133, 4.51, Examples 4-4 (Reference Option) & 4-6 (Inclusion Option) for illustrative
    reports.)

    a.   A statement that the auditor has audited the financial statements of the auditee and a
         reference to the auditor's report on the financial statements, including a description of any
         departure from the standard report?
         (Note 1: Unless there is only one opinion unit, this statement should indicate that the
         auditor has audited the financial statements of each opinion unit. Opinion units
         referenced here should be the same as those opined on in the Auditor’s Report on the
         financial statements. (GUIDE-GAS/A-133, 4.51, footnote 22))
         (Note 2: “Departure from the standard report” includes a qualified opinion, a
         modification as to consistency, or a reference to the report of other auditors, to name a
         few examples. (GUIDE-GAS/A-133, 4.51, footnote 23) When referring to other auditors,
         the phrase “Our report includes a reference to other auditors.” should be added.
         (GUIDE-GAS/A133, 4.51, Examples 4-4 & 4-6))




                                                              -66-
DESK REVIEW – 2010

REVIEW ITEM                                                                                               YES   NO   N/A   REF

81. GAS Report on Internal Control and Compliance – continued:

   b.   A statement that the audit was conducted in accordance with auditing standards generally
        accepted in the United States of America (or U.S. generally accepted auditing standards)
        (AU 508.08) and with the standards applicable to financial audits contained in
        Government Auditing Standards issued by the Comptroller General of the United States?
        (Note 1: Modified GAS Compliance Statement: If the audit was performed in
        accordance with GAS, except for specific requirements that weren’t followed, OR if the
        auditor was unable to or did not perform the audit in accordance with GAS, a modified
        GAS compliance statement should be used. (GUIDE-GAS/A-133, 4.24 – 4.25) In
        addition, if the financial statements include an organization unit that is not required to
        have a GAS audit, the scope paragraph should also be modified. (GUIDE-GAS/A133,
        4.51 footnote 25))
        (Note 2: Reference to Other Auditors: See GUIDE-GAS/A133, 4.51, Examples 4-4 & 4-
        6 for illustrative language to use in this scope paragraph when referring to other
        auditors:
             Example 4-4, Reference Option: “Other auditors audited the financial statements
             of [identify organization, function, or activity], as described in our report on
             [Entity’s] financial statements. This report does not include the results of the other
             auditors’ testing of internal control over financial reporting or compliance and other
             matters that are reported on separately by those auditors.”
             Example 4-6, Inclusion Option: “Other auditors audited the financial statements of
             [identify organization, function, or activity], as described in our report on [Entity’s]
             financial statements. This report includes our consideration of the results of the
             other auditors’ testing of internal control over financial reporting or compliance and
             other matters that are reported on separately by those auditors. However, this
             report, insofar as it relates to the results of the other auditors, is based solely on the
             reports of the other auditors.”)
   Internal Control Section

   c.   A statement that, in planning and performing the audit, the auditor considered the
        auditee’s internal control over financial reporting as a basis for designing the auditing
        procedures for the purpose of expressing (an) opinion(s) on the financial statements but
        not for the purpose of expressing an opinion on the effectiveness of internal control over
        financial reporting, and, accordingly, does not express an opinion on the effectiveness of
        the auditee’s internal control over financial reporting? (Note: Unless there is only one
        opinion unit, this statement should indicate that the auditor has audited the financial
        statements of each opinion unit. (GUIDE-GAS/A-133, 4.51, Example 4-3, Footnote 22))

   d.   If no material weaknesses or significant deficiencies are identified: (GUIDE-GAS/A-
        133, 4.51 Example 4-3; AU 325.28 Exhibit A)

        1.   The definitions of deficiency in internal control and material weakness?

        2.   A statement that the auditor’s consideration of internal control over financial
             reporting (was for the limited purpose described in the first paragraph of this section
             and) is not designed to identify all deficiencies in internal control over financial
             reporting that might be deficiencies, significant deficiencies, or material weaknesses?

        3.   A statement that no material weaknesses were identified?

        4.   The auditor does not state that no significant deficiencies were identified during the
             audit? (AU 325.25)




                                                              -67-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

81. GAS Report on Internal Control and Compliance – continued:

   e.   If significant deficiencies are identified, but no material weaknesses identified:
        (GUIDE-GAS/A-133, 4.51 Example 4-5; AU 325.28 Exhibit A)

        1.   The definitions of deficiency in internal control and material weakness? (“A
             deficiency in internal control exists when the design or operation of a control does
             not allow management or employees, in the normal course of performing their
             assigned functions, to prevent, or detect and correct misstatements on a timely basis.
             A material weakness is a deficiency, or a combination of deficiencies, in internal
             control such that there is a reasonable possibility that a material misstatement of the
             entity’s financial statements will not be prevented, or detected and corrected on a
             timely basis”)

        2.   A statement that the auditor’s consideration of internal control over financial
             reporting (was for the limited purpose described in the first paragraph of this section
             and) was not designed to identify all deficiencies in internal control over financial
             reporting that might be deficiencies, significant deficiencies, or material weaknesses?

        3.   A statement that no material weaknesses were identified?

        4.   A statement that (However) certain deficiencies in internal control over financial
             reporting were identified that the auditor considers to be significant deficiencies?

        5.   A description of the significant deficiencies identified (including the views of
             responsible officials and their planned corrective action) or a reference to a separate
             schedule in which significant deficiencies, views of responsible officials, and their
             planned corrective action are described? (Note: In a non-A-133 report, findings may
             be reported in the body of the report or in a separate schedule. In an A-133 audit,
             all findings should be included in the Schedule of Findings and Questioned Costs.
             (GUIDE-GAS/A-133, Chap. 4, footnote 26))

             a.   Has each finding been assigned a reference number, and are reference numbers
                  listed here? (Recommended – GUIDE-GAS/A-133, 4.34; Required for A-133
                  audits (A-133, §.510(c))

        6.   The definition of significant deficiency (“a deficiency, or a combination of
             deficiencies, in internal control that is less severe than a material weakness, yet
             important enough to merit attention by those charged with governance”)?

   f.   If material weaknesses and significant deficiencies are identified: (GUIDE-GAS/A-
        133, 4.51 Example 4-7; AU 325.28 Exhibit A)
        (Note: SAS 115 (AU 325.15) lists the following indicators of material weaknesses in
        internal control: • identification of fraud, whether or not material, on the part of senior
        management; •restatement of previously issued financial statements to reflect the
        correction of a material misstatement due to error or fraud; • identification by the
        auditor of a material misstatement of the financial statements under audit in
        circumstances that indicate that the misstatement would not have been detected by the
        entity’s internal control; and • ineffective oversight of the entity’s financial reporting and
        internal control by those charged with governance.)




                                                              -68-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

81. GAS Report on Internal Control and Compliance – continued:
       1.   A statement that the auditor’s consideration of internal control over financial
            reporting (was for the limited purpose described in the preceding paragraph and) was
            not designed to identify all deficiencies in internal control over financial reporting
            that might be significant deficiencies or material weaknesses and, therefore, there
            can be no assurance that all deficiencies, significant deficiencies, or material
            weaknesses have been identified?

       2.   A statement that (However) certain deficiencies in internal control over financial
            reporting were identified that the auditor considers to be material weaknesses [and
            other deficiencies that we consider to be significant deficiencies]? (Note: If no
            significant deficiencies are identified, text within the brackets should be omitted.)

       3.   A description of the material weaknesses identified (including the views of
            responsible officials and their planned corrective action) or a reference to a separate
            schedule in which material weaknesses, views of responsible officials, and their
            planned corrective action are described? ((Note: In a non-A-133 report, findings
            may be reported in the body of the report or in a separate schedule. In an A-133
            audit, all findings should be included in the Schedule of Findings and Questioned
            Costs. (GUIDE-GAS/A-133, Chap. 4, footnote 26))

            a.   Has each finding been assigned a reference number, and are reference numbers
                 listed here? (Recommended – GUIDE-GAS/A-133, 4.34)

       4.   The definitions of deficiency in internal control and material weakness? (“A
            deficiency in internal control exists when the design or operation of a control does
            not allow management or employees, in the normal course of performing their
            assigned functions, to prevent, or detect and correct misstatements on a timely basis.
            A material weakness is a deficiency, or a combination of deficiencies, in internal
            control such that there is a reasonable possibility that a material misstatement of the
            entity’s financial statements will not be prevented, or detected and corrected on a
            timely basis”) (Note: Example 4-7 includes another reference here to those
            deficiencies deemed to be material weaknesses.)

       5.   If other deficiencies considered to be significant deficiencies are identified: The
            definition of significant deficiency (“a deficiency, or a combination of deficiencies,
            in internal control that is less severe than a material weakness, yet important enough
            to merit attention by those charged with governance”.)?

       6.   If other deficiencies considered to be significant deficiencies are identified: A
            description of the significant deficiencies identified (including the views of
            responsible officials and their planned corrective action) or a reference to a separate
            schedule in which significant deficiencies, views of responsible officials, and their
            planned corrective action are described?
            (Note 1: The GUIDE recommends that each finding be assigned a reference number,
            which would be listed here. (GUIDE-GAS/A-133, 4.34))
            (Note 2: In a non-A-133 report, findings may be reported in the body of the report
            or in a separate schedule. In an A-133 audit, all findings should be included in the
            Schedule of Findings and Questioned Costs. (GUIDE-GAS/A-133, Chap. 4, footnote
            26))




                                                             -69-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

81. GAS Report on Internal Control and Compliance – continued:

   g.   If the inclusion method is used to reference other auditors: Has the wording in Example
        4-6 of the GUIDE-GAS/A-133 4.51 been used when referring to audit findings identified
        by the other auditors? (i.e., “However, we and the other auditors identified certain
        deficiencies…”) (Note: If other auditor’s reports include significant deficiencies and
        material weaknesses, the principal auditor should use professional judgment to
        determine whether those findings should be reported, using the materiality levels
        appropriate for the scope of the principal auditor’s audit and considering the scope of
        the other auditors’ audit. See GUIDE-GAS/A-133, 4.47 & Table 4-3, including notes to
        the Table.)

   Compliance Section

   h.   A statement that, as part of obtaining reasonable assurance about whether the auditee’s
        financial statements are free of material misstatement, the auditor performed tests of the
        auditee’s compliance with certain provisions of laws, regulations, contracts, and grant
        agreements, noncompliance with which could have a direct and material effect on the
        determination of financial statement amounts?

   i.   A statement that (However,) providing an opinion on compliance with those provisions
        was not an objective of the audit and that, accordingly, the auditor does not express such
        an opinion?

   j.   If no instances of noncompliance or other matters: a statement that the results of tests
        disclosed no instances of noncompliance or other matters that are required to be reported
        under GAS? (Note: “Other matters” refer to certain findings of fraud or abuse. The
        reference to “other matters” in both the heading and paragraph should appear in all
        reports, even if the report doesn’t present findings of fraud or abuse. (GUIDE-GAS/A-
        133, 4.51, footnote 28))

   k.   If instances of noncompliance or other matters reported:

        (1) A statement that the results of tests disclosed instances of noncompliance or other
            matters that are required to be reported under GAS? (Note: If other auditor’s
            reports include material noncompliance or abuse, the principal auditor should use
            professional judgment to determine whether those findings should be reported, using
            the materiality levels appropriate for the scope of the principal auditor’s audit and
            considering the scope of the other auditors’ audit. See GUIDE-GAS/A-133, 4.47 &
            Table 4-3, including notes to the Table.)

        (2) A description of instances of noncompliance and other matters noted (including the
            views of responsible officials and their planned corrective action), or a reference to a
            separate schedule that describes the instances of noncompliance and other matters,
            views of responsible officials, and their planned corrective action? (Note: In a non-
            A-133 report, findings may be reported in the body of the report or in a separate
            schedule. In an A-133 audit, all findings should be included in the Schedule of
            Findings and Questioned Costs. (GUIDE-GAS/A-133, Chap. 4, footnote 26))

   l.   If applicable, a statement that additional (or certain) matters were communicated to
        management in a separate letter?
        (Note 1: Matters That Are More than Inconsequential: “Additional” or ”certain”
        matters to be reported here include violations of provisions of contracts or grant
        agreements or abuse that have a less than material but more than inconsequential effect
        on the financial statements. These matters should be communicated in writing, and may
        be presented in a management letter. If a management letter is issued, it should be
        referenced in the report on internal control and compliance. (GAS 5.09& 5.16; GUIDE-
        GAS/A-133 4.37 & 4.51, Example 4-3, footnote 29))

                                                             -70-
DESK REVIEW – 2010

REVIEW ITEM                                                                                               YES   NO   N/A   REF

81. GAS Report on Internal Control and Compliance – continued:

         (Note 2: Matters That Are Clearly Inconsequential: It is a matter of the auditor’s
         professional judgment whether and how to communicate fraud, illegal acts, violations of
         provisions of contracts or grant agreements, or abuse, or internal control deficiencies
         that are clearly inconsequential. (GUIDE-GAS/A-133, 4.28, footnote 28 & 4.37; GAS
         5.14 & 5.16) Nothing precludes the auditor from communicating to management and
         those charged with governance other matters such as recommendations for operational
         or administrative efficiency, or control deficiencies that are not significant deficiencies or
         material weaknesses. (AU 325.24)) When a management letter is issued only to provide
         management with efficiency comments or to communicate nonsignificant deficiencies
         (i.e., no items required to be communicated by GAS), a reference to the management
         letter doesn’t need to be put in the auditor’s reports. (GUIDE-GAS/A-133, 4.38 & Exhibit
         4-1))
         (Note 3: Management Letters of Other Auditors: In situations where the other auditors
         have issued management letters that include matters required to be reported under GAS,
         the principal auditor’s report should also include a reference to the management letters
         of the other auditors. (GUIDE-GAS/A-133, 4.47, Table 4-3, footnote 1))

    m. Views of Responsible Officials and Planned Corrective Action:
         (1) Has the auditor reported the views of responsible officials concerning the findings, as
             well as planned corrective actions? (GAS 5.32 – 5.37; GUIDE-GAS/A133, 4.35)
             (Note 1: If the audited entity refuses, or is unable, to provide comments within a
             reasonable period of time, the auditor may issue the report without the comments,
             but should indicate in the report that the entity did not provide comments (GAS 5.38;
             GUIDE-GAS/A133, 4.36) (& may indicate that the entity has 30 days from the date
             of issuance of the report to respond to the findings, per State law.)
             (Note 2: The auditor may add a statement disclaiming an opinion on the written
             response to the findings – “’Entity’s’ written response to the significant deficiencies
             and material weaknesses identified in our audit has not been subjected to the
             auditing procedures applied in the audit of the financial statements and, accordingly,
             we express no opinion on it.” (AU 325.26; GUIDE-GAS/A133, 4.35))

    n.   A statement that the report is intended solely for the information and use of management,
         [identify the body or individuals charged with governance], others within the entity, the
         Montana Department of Administration, the Montana Office of Public Instruction (for
         school district and special education cooperatives)**, and federal awarding agencies and
         pass-through entities (as applicable for A-133 audit reports), and is not intended to be
         and should not be used by anyone other than these specified parties. (**Note: Other
         specified parties may be included here as applicable.) (GUIDE-GAS/A-133, 4.28,
         footnote 30; AU 532.19)

    o.   The manual or printed signature of the auditor's firm?

    p.   The date of the auditor's report? (Note: This date should be the same as the date on the
         report on the financial statements. (GUIDE-GAS/A-133, 4.51 footnote 32))

82. In presenting audit findings, has the auditor developed the elements of criteria, condition,
    cause, effect and recommendation, to the extent possible, and is each finding placed in proper
    perspective? (GAS 5.21 & 5.22, 4.14 – 4.18; GUIDE-GAS/A-133 4.32 & 4.33)

83. Is each audit finding reported in accordance with GAS assigned a reference number?
    (GUIDE-GAS/A-133, 4.34; A-133, §5.10(c)) (Note: A-133 requires all findings (include
    GAS findings) to have a reference number; the AICPA Audit Guide recommends this.)




                                                               -71-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES     NO      N/A      REF

84. If there are findings and recommendations, have the views of entity officials and planned
    corrective actions been included in the audit report? (Note: If the officials’ comments are
    inconsistent with the auditor’s findings or recommendations or when corrective actions do
    not address the recommendations, the auditor should either report his disagreement, or
    modify his report if the officials’ comments are valid. GAS 5.35 requires that the auditor
    include in the report “an evaluation of the comments, as appropriate”, although there are no
    illustrative examples of this. (GAS 5.32 – 5.38; GUIDE-GAS/A-133, 4.33 &4.34; SAC, para.
    9.f.)

    a.   Does the auditor provide a disclaimer of opinion on the corrective actions provided by
         entity officials? (GUIDE-GAS/A-133, 4.35 & 4.51, Example 4-5)

    b.   If the entity does not provide comments and corrective actions by the time the audit
         report is released, does the report indicate that the audited entity did not provide them?
         (GAS 5.38; GUIDE-GAS/A-133, 4.36; SAC, para. 9.f.) (Note: State law (MCA 2-7-515)
         allows the entity 30 days from receipt of the audit report to notify the LGS Bureau of
         corrective actions.)

Compliance and Internal Control Reports in Accordance with OMB Circular A-133
OMB Circular A-133 requires the auditor to: (A-133, §.505(b) & (c))
     a. report on the internal control related to the financial statements;
     b. report on the internal control related to major federal programs;
     c. report on compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which
          could have a material effect on the financial statements; and
     d. express an opinion (or disclaimer of opinion) as to whether the auditee complied with laws, regulations, and the provisions of
          contracts or grant agreements which could have a direct and material effect on each major federal program.
The Circular states that these reports may be in the form of either combined or separate reports. These reports should, where
applicable, refer to a separate schedule of findings and questioned costs. GUIDE-GAS/A-133 contains illustrative reports that
combine the reports on compliance and internal control related to the financial statements (a. & c., above) and combine the reports on
compliance and internal control related to the major federal financial assistance programs (b. & d., above). The AICPA recommends
that these combined reports be used (GUIDE-GAS/A-133, 12.07), and doesn’t provide examples of separate reports on compliance
and internal control.
Circular A-133 requires that the auditee prepare a summary schedule of prior audit findings (A-133, §.315), and requires that the
auditor follow-up on these prior audit findings and assess the reasonableness of the summary. (A-133, §.500(e)) The Circular also
requires that the auditee prepare a corrective action plan to address each current year audit finding (A-133, §.315). The summary
schedule of prior audit findings and the corrective action plan are part of the audit reporting package (A-133, §.320(c)).

85. Does the combined report on compliance and internal control related to the financial
    statements (“Report on Internal Control Over Financial Reporting and Compliance and Other
    Matters Based on an Audit of Financial Statements Performed in Accordance With
    Government Auditing Standards”) contain the elements required by GUIDE-GAS/A-133,
    4.28? (See checklist item #81 for required elements)

86. Does the combined report on compliance and internal control related to major federal
    financial assistance programs (“Report on Compliance With Requirements Applicable to
    That Could Have a Direct and Material Affect on Each Major Program and on Internal
    Control Over Compliance in Accordance With OMB Circular A-133") contain the following:
    (GUIDE-GAS/A-133, 13.23 & 13.56, Examples 13-1 to 13-5; A-133, §505)
    (Note 1: Highlighted changes in the title and body of this report are made for the purpose
    of adapting SAS 115 & SAS 117 to a Circular A-133 compliance audit; SAS 115 & SAS
    117 are effective for FY2010 audits. (AU §801; GUIDE-GAS/A133, 13.06, 13.23 & 13.56
    Appendix A).




                                                            -72-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

86. A-133 Report on Compliance and Internal Control - continued

    (Note 2: The illustrative GAS reports sequence internal control before compliance, while the
    illustrative Circular A-133 reports sequence compliance before internal control. Auditors
    may present the internal control and compliance sections in the GAS and A-133 reports in
    whichever sequence better meets their needs. (GUIDE-GAS/A-133, 4.51 Example 4-3,
    footnote 27 & 13.56 Example 13.1. footnote 2))
    (Note 3: Reissuance of Compliance Report: If an auditor reissues the Circular A-133
    report, the reissued report should include (1) an explanatory paragraph stating that the
    report is replacing a previously issued report, (2) a description of the reasons for the
    reissuance, and (3) a list of any changes from the previously issued report. If additional
    procedures are performed to obtain sufficient appropriate audit evidence for all of the major
    programs being reported on, the report date should be updated. If additional procedures are
    performed for only some of the major programs, the report should be dual dated. Reissuance
    of an auditor-prepared document required by Circular A-133 that is incorporated by
    reference into the compliance report (for example, the Schedule of Findings and Questioned
    Costs) is considered to be reissuance of the report. (SAS 117 (AU §801.43); GUIDE-
    GAS/A133, 13.26 & .27))

    a.   A title that includes the word “Independent”? (Note: This has been added as a basic
         element of the report, to reflect the requirements of SAS 117 (AU §801.30) (effective
         FY2010). (GUIDE-GAS/A133, 13.23 & Illustrative Reports in 13.56, Appendix A))

    Compliance Section

    b.   A statement that the auditor has audited the entity’s compliance with the types of
         compliance requirements described in the OMB Circular A-133 Compliance Supplement
         that are applicable to could have a direct and material effect on each of its major federal
         programs?

    c.   Identification of the period covered by the report? (Note: This has been added as a basic
         element of the report, to reflect the requirements of SAS 117 (AU §801.30) (effective
         FY2010). (GUIDE-GAS/A133, 13.23 & Illustrative Reports in 13.56, Appendix A))

    d.   A statement that the entity’s major federal programs are identified in the summary of the
         auditor’s results section of the accompanying schedule of findings and questioned costs?

    e.   A statement that compliance with the requirements of laws, regulations, contracts, and
         grants applicable to each of the entity’s major federal programs is the responsibility of the
         entity’s management, and that the auditor’s responsibility is to express an opinion on the
         entity’s compliance based on the audit?

    f.   If the audit of federal awards does not encompass the entirety of the entity’s
         operations expending federal awards (for instance, when a component unit is audited
         by another auditor): are the operations not included identified in a separate paragraph
         (following the first paragraph of the report)? See GUIDE-GAS/A133, 13.32 for
         recommended wording to use in this instance.

    g.   A statement that the compliance audit was conducted in accordance with auditing
         standards generally accepted in the United States of America (or U.S. generally accepted
         auditing standards), the standards applicable to financial audits contained in Government
         Auditing Standards issued by the Comptroller General of the United States, and Circular
         A-133?




                                                              -73-
DESK REVIEW – 2010

REVIEW ITEM                                                                                           YES   NO   N/A   REF

86. A-133 Report on Compliance and Internal Control - continued

    h.   A statement that those standards and Circular A-133 require that the auditor plan and
         perform the audit to obtain reasonable assurance about whether noncompliance with the
         types of compliance requirements that could have a direct and material effect on a major
         federal program occurred?

    i.   A statement that an audit includes examining, on a test basis, evidence about the entity’s
         compliance with those requirements and performing such other procedures as the auditor
         considered necessary in the circumstances?

    j.   A statement that the auditor believes that the compliance audit provides a reasonable
         basis for the auditor’s opinion?

    k.   A statement that the compliance audit does not provide a legal determination of the
         entity’s compliance with those requirements?

    l.   If instances of noncompliance are noted that result in an opinion modification, a
         reference to a description in the accompanying schedule of findings and questioned costs,
         including: (GUIDE-GAS/A-133, 12.54, Example 12-3) (Note: Circular A-133 requires
         that the auditor consider a lower level of materiality for purposes of reporting audit
         findings than the level of materiality used when giving an opinion on the auditee’s
         compliance with major program requirements (GUIDE-GAS/A-133, 6.30 to 6.32).
         Thus, noncompliance which is material to a compliance requirement for a particular
         major program may meet the criteria of A-133, §.510(a) for inclusion as an audit finding
         in the schedule of findings and questioned costs, but may not be material to the major
         program as a whole.)

         (1) The reference number(s) of the finding(s)? (A-133, §5.10(c))

         (2) An identification of the type(s) of compliance requirements and related major
             program(s)?

         (3) A statement that compliance with such requirements is necessary, in the auditor’s
             opinion, for the entity to comply with the requirements applicable to the program(s)?

    m. An opinion on whether the entity complied, in all material respects, with the types of
       compliance requirements that are applicable to could have a direct and material effect on
       each of its major federal programs? (If a qualified opinion: “In our opinion, except for
       the noncompliance described in the preceding paragraph…”)

    n.   If other instances of noncompliance are identified as required by Circular A-133: a
         statement that the results of the auditing procedures disclosed instances of noncompliance
         that are required to be reported in accordance with Circular A-133 and a reference to the
         schedule of findings and questioned costs in which they are described, including the
         reference numbers of the findings? (GUIDE-GAS/A-133, 12.54, Example 12-2 &
         Example 12-3, footnote 21)?

    Internal Control Section

    o.   A statement that the entity’s management is responsible for establishing and maintaining
         effective internal control over compliance with the requirements of laws, regulations,
         contracts, and grants applicable to federal programs?




                                                             -74-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

86. A-133 Report on Compliance and Internal Control - continued

    p.   A statement that, in planning and performing the compliance audit, the auditor considered
         the entity’s internal control over compliance with requirements that could have a direct
         and material effect on a major federal program, to determine the auditing procedures for
         the purpose of expressing an opinion on compliance and to test and report on internal
         control over compliance in accordance with Circular A-133, but not for the purpose of
         expressing an opinion on the effectiveness of internal control over compliance?

    q.   A statement that accordingly, the auditor does not express an opinion on the effectiveness
         of internal control over compliance?

    r.   If the auditor has identified NO material weaknesses or significant deficiencies in
         internal control over compliance: (See Example 13-1 in GUIDE-GAS/A133, 13.56)

         (1) The definitions of deficiency in internal control over compliance and material
             weakness in internal control over compliance? (Note: A deficiency in internal
             control over compliance exists when the design or operation of a control over
             compliance does not allow management or employees, in the normal course of
             performing their assigned functions, to prevent, or detect and correct, noncompliance
             with a type of compliance requirement of a federal program on a timely basis. A
             material weakness in internal control over compliance is a deficiency, or a
             combination of deficiencies, in internal control over compliance, such that there is a
             reasonable possibility that material noncompliance with a type of compliance
             requirement of a federal program will not be prevented, or detected and corrected, on
             a timely basis.)

         (2) A statement that the auditor’s consideration of internal control over compliance (was
             for the limited purpose described in the first paragraph of this section and) was not
             designed to identify all deficiencies in internal control over compliance that might be
             deficiencies, significant deficiencies or material weaknesses?

         (3) A statement that no material weaknesses in internal control over compliance were
             identified?

         (4) The auditor does not state that no significant deficiencies were identified during the
             audit? (AU 325.25)

    s.   If the auditor has identified significant deficiencies but NO material weaknesses in
         internal control over compliance: (See Example 13-2 in GUIDE-GAS/A133, 13.56)

         (1) The definitions of deficiency in internal control over compliance and material
             weakness in internal control over compliance? (See definitions above)

         (2) A statement that the auditor’s consideration of internal control over compliance (was
             for the limited purpose described in the first paragraph of this section and) was not
             designed to identify all deficiencies in internal control over compliance that might be
             deficiencies, significant deficiencies or material weaknesses?

         (3) A statement that no material weaknesses in internal control over compliance were
             identified?

         (4) A statement that deficiencies in internal control over compliance were identified that
             are considered to be significant deficiencies?



                                                              -75-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

86. A-133 Report on Compliance and Internal Control - continued

         (5) A description of the significant deficiencies in internal control over compliance or a
             reference to the accompanying schedule of findings and questioned costs, including
             the reference numbers of the findings?

         (6) The definition of significant deficiency in internal control over compliance? (Note:
             A significant deficiency in internal control over compliance is a deficiency or a
             combination of deficiencies, in internal control over compliance with a type of
             compliance requirement of a federal program that is less severe than a material
             weakness in internal control over compliance, yet important enough to merit
             attention by those charged with governance.)

    t.   If the auditor has identified material weaknesses and significant deficiencies in
         internal control over compliance: (See Example 13-3 in GUIDE-GAS/A133, 13.56)

         (1) A statement that the auditor’s consideration of internal control over compliance (was
             for the limited purpose described in the preceding paragraph section and) was not
             designed to identify all deficiencies in internal control over compliance that might be
             significant deficiencies or material weaknesses, and therefore there can be no
             assurance that all deficiencies, significant deficiencies, or material weaknesses in
             internal control over compliance have been identified?

         (2) A statement that the auditor has identified certain deficiencies in internal control
             over compliance that are considered to be material weaknesses, and other
             deficiencies that are considered to be significant deficiencies?

         (3) The definitions of deficiency in internal control over compliance and material
             weakness in internal control over compliance (see definitions above), and a
             description of the material weaknesses or a reference to the accompanying schedule
             of findings and questioned costs, including the reference numbers of the findings?

         (4) The definition of significant deficiency in internal control over compliance (see
             definition above), and a description of the significant deficiencies or a reference to
             the accompanying schedule of findings and questioned costs, including the reference
             numbers of the findings?

    u.   If applicable, a statement that the entity’s response to the findings identified in the audit
         are described in the accompanying schedule of findings and questioned costs, and a
         statement that the entity’s response was not audited and no opinion is expressed on it?

    v.   A statement that the report is intended solely for the information and use of management,
         [identify the body or individuals charged with governance], others within the entity, the
         Montana Department of Administration, the Montana Office of Public Instruction (for
         school districts and special education cooperatives), ** and federal awarding agencies
         and pass-through entities and is not intended to be and should not be used by anyone
         other than these specified parties. (AU §532.19) (**Note: Other specified parties may
         be included here as applicable.)

    w. The manual or printed signature of the auditor’s firm?




                                                                -76-
DESK REVIEW – 2010

REVIEW ITEM                                                                                            YES   NO   N/A   REF

86. A-133 Report on Compliance and Internal Control - continued

    x.   The date of the auditor’s report?
         (Note 1: This date should generally be the same date as other reports, unless some audit
         work related to Circular A-133 is performed subsequent to work on the financial
         statements. If such is the case, the auditor should perform subsequent events procedures
         from the date of the financial statement report to the date of this report. (GUIDE-GAS/A-
         133, 12.27))
         (Note 2: Reissuance of Compliance Report: If an auditor reissues the Circular A-133
         report, and if additional procedures are performed to obtain sufficient appropriate audit
         evidence for all of the major programs being reported on, the report date should be
         updated. If additional procedures are performed for only some of the major programs,
         the report should be dual dated. (SAS 117 (AU §801.43); GUIDE-GAS/A133, 13.26 &
         .27))

87. If a component unit was audited by other auditors in accordance with Circular A-133, did the
    "Report on Compliance With Requirements Applicable To That Could Have a Direct and
    Material Effect on Each Major Program and Internal Control Over Compliance in Accordance
    With OMB Circular A-133" include a paragraph, following the first paragraph, which
    identifies the federal awards which are not included in the schedule of expenditures of federal
    awards? (GUIDE-GAS/A-133, 13.32)

88. Does the report contain a schedule of findings and questioned costs, and does it contain the
    following: (A-133 §.505(d); GUIDE-GAS/A-133, 13.34 & 13.56, Example 13-6) (Note: A
    schedule of findings and questioned costs must be issued for every Single Audit, regardless of
    whether any findings or questioned costs are noted. (GUIDE-GAS/A-133, 13.42))

    a.   A summary of the auditor’s results, including?: (Note: The number and types of findings
         reported in the GAS and A-133 reports, and the types of opinions rendered on the F/S
         and major program compliance, should be accurately reflected in this summary.)

         (1) The type of report the auditor issued on the financial statements (i.e., unqualified,
             qualified, adverse, disclaimer)?

         (2) Where applicable, a statement that significant deficiencies in internal control were
             disclosed by the audit of the financial statements and whether any such deficiencies
             were material weaknesses? (Note: The term "none reported" should be used to
             indicate that no significant deficiencies were included in the auditor's report (versus
             "none" which would imply that there were no significant deficiencies). (GUIDE-
             GAS/A-133, 13.34 footnote 22 and 13.56, Example 13-6))

         (3) A statement as to whether the audit disclosed any noncompliance that is material to
             the financial statements?

         (4) Where applicable, a statement that significant deficiencies in internal control over
             major programs were disclosed by the audit and whether any such conditions were
             material weaknesses? (Note: The term "none reported" should be used to indicate
             that no significant deficiencies were included in the auditor's report (versus "none"
             which would imply that there were no significant deficiencies). (GUIDE-GAS/A-
             133, 13.34 footnote 22 and 13.56, Example 13-6))

         (5) The type of report the auditor issued on compliance for major programs (i.e.
             unqualified, qualified, adverse, or disclaimer)?




                                                              -77-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

88. Schedule of Findings and Questioned Costs - continued:

         (6) A statement as to whether the audit disclosed any audit findings which the auditor is
             required to report under §.510(a) of Circular A-133? (Note: These include (1)
             significant deficiencies in I/C over major programs; (2) material noncompliance
             related to a major program; (3) known QC which are greater than $10,000 for a
             type of compliance requirement for a major program (should also report known QC
             when likely QC are greater than $10,000); (4) known QC which are greater than
             $10,000 for a program not audited as major; (5) reasons for other than an
             unqualified opinion on compliance for major programs is other than an unqualified
             opinion, unless otherwise reported as an audit finding; (6) known fraud affecting
             federal awards unless otherwise reported as an audit finding; and (7) the summary
             schedule of prior audit findings materially misrepresents the status of any prior audit
             finding. (GUIDE-GAS/A-133, 13.37))

         (7) An identification of major programs?

         (8) The dollar threshold used to distinguish between Type A and Type B programs as
             described in §.520.(b) of Circular A-133?

         (9) A statement as to whether the auditee qualified as a low-risk auditee under §.530 of
             Circular A-133? (Note to Reviewer: If the Schedule identifies the entity as low-
             risk, verify (by reviewing the entity’s prior two audit reports) that the entity
             qualifies as low-risk. Also, see Note 2, below.)
             (Note 1: An auditee must meet all of the following conditions for each of the two
             preceding audit periods to qualify as low-risk: (1) Single audits were performed on
             an annual basis (an entity that has biennial audits doesn’t qualify unless agreed to in
             advance by a federal oversight agency); (2) Auditor’s opinions on the financial
             statements and on the federal schedules were unqualified; (3) There were no
             deficiencies in internal control over financial reporting that were identified as
             material weaknesses under the requirements of GAS; and (4) No federal programs
             classified as type A in the preceding two audits had audit findings from any of the
             following: material weaknesses in the internal control over compliance;
             noncompliance with the provisions of laws, regulations, contracts, or grants
             agreements that have a material effect on the type A program; or know or likely
             questioned costs that exceed 5% of the total federal awards expended for a type A
             program during the year. (GUIDE-GAS/A-133, 8..26))
             (Note 2: An auditee would not meet the criteria for a low-risk auditee if the audits
             for either of the prior two years were not filed with the Federal Audit Clearinghouse
             by the due date of March 31(or 9 months after FYE). To determine whether the prior
             audits were filed with the FAC by the due date – access the FAC webpage at
             http://harvester,.census.gov/sac Search for the entity and the “FAC Accepted Date”.
             (Circular A-133 Compliance Supplement 2010, Appendix 7))

    b.   Findings relating to the financial statements that are required to be reported in accordance
         with Government Auditing Standards, including the following situations if applicable:?

         (1) A “SAS 115” finding, when the results of the audit clearly indicate that the entity
             doesn’t have effective internal controls over the GAAP reporting process, (including
             material restatement of a prior year)? (Note: Although this situation involves the
             auditor’s professional judgment, the auditor is required to include a finding when
             significant deficiencies & material weaknesses in I/C are present. A compensating
             control may limit the severity of a deficiency, but does not eliminate the deficiency. A
             finding should be reported, even though the deficiency was remediated during the
             audit. The auditor cannot be part of an entity’s internal control system.) (AU §325)




                                                              -78-
DESK REVIEW – 2010

REVIEW ITEM                                                                                              YES   NO   N/A   REF

88. Schedule of Findings and Questioned Costs - continued:

         (2) Omission of RSI, or material departures from prescribed RSI guidelines?
         (3) If a school district audit, any variance in the Enrollment Schedule? (As the funding
             agency for school district, OPI has determined that any variance is material for their
             purposes.)
         (4) Non-compliance with various laws and regulations that is material to the financial
             statements or that may indicate an internal control deficiency in the entity’s control
             environment? (This may include significant budget overdrafts, failure to meet
             reporting deadlines established by State and Federal agencies, or if a school district
             audit, significant District-related activity included in the extracurricular funds, etc.
             If non-compliance is reported, ensure that the cited law is applicable to the entity.)

    c.   Findings and questioned costs for Federal awards, as defined in §.510(a) of Circular A-
         133? (Note: See checklist item #88.a.(6) above regarding §.510(a) requirements.)

         (1). In the audit finding detail, is there explicit identification of findings that relate to
              Recovery Act programs? (GUIDE-GAS/A133, 13.55)

89. Did the auditor audit as major any Type A program that (a) was not audited as major during
    one of the two prior years OR (b) if audited in the prior audit period, had a significant
    deficiency, material noncompliance or qualified opinion on compliance? (A-133 §.520(c);
    GUIDE-GAS/A-133, 8.12 & 8.18)
    (Note 1: Unlike the conditions discussed at GUIDE-GAS/A-133, 8.27 –8.34, auditor
    judgment is not permitted in evaluating this criterion.)
    (Note 2: Loans and Loan Guarantees: The inclusion of large loan and loan guarantees
    should not result in the exclusion of other programs as Type A programs. If significant, the
    auditor shall consider the federal loan or loan guarantee program as a Type A program and
    exclude its values in determining other Type A programs. (A133, §.520(b)(3)) See A-133
    Compliance Supplement 2010, Appendix 7 (GUIDE-GAS/A133, 8.08) for discussion of “safe
    harbor” calculations when determining major federal programs when the entity has a large
    loan or loan guarantee.)
    (Note 3: ARRA Expenditures: The federal expectation is that it will be uncommon for a
    federal program with ARRA expenditures to be considered low-risk. Even though a Type A
    program otherwise meets the criteria as low-risk under A-133 §.520(c) (discussed above), any
    program or cluster with expenditures of ARRA awards would NOT qualify as a low-risk Type
    A, even with de minimus ARRA expenditures. Exception: the program/cluster may be
    considered low-risk if ALL of the following conditions are met: (1) had ARRA expenditures
    in prior audit period, (2) was audited as major in prior audit period; (3) current-period
    ARRA expenditures are less than 20% of total program/cluster expenditures; and (4) auditor
    has determined the program/cluster is otherwise low-risk per §.520(c) & §.525.) (A-133
    Compliance Supplement 2010, Appendix 7; GUIDE-GAS/A133, 8.40))
    (Note 4: ARRA Clusters: If an ARRA CFDA number has been added to a cluster of
    programs, that cluster will not qualify as a low-risk Type A program (i.e., it will not meet the
    requirement of having been audited as a major program in at least one of the two most recent
    audit periods as the federal program funded under ARRA either (1) was not previously
    included in the cluster OR (2) did not previously exist). (A-133 Compliance Supplement 2010,
    Appendix 7; GUIDE-GAS/A133, 8.39) See A-133 Compliance Supplement 2010, Part 5, for
    additional and expanded clusters of programs due to ARRA funding – notably in HUD, ED,
    HHS, & DHS.)




                                                                 -79-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

90. Did the auditor consider all programs included in a cluster of programs as one program, when
    determining major programs? (A-133 §.105; GUIDE-GAS/A-133 5.31)
    (Note: See A-133 Compliance Supplement 2010, Part 5, for additional and expanded clusters
    of programs due to ARRA funding – notably in HUD, ED, HHS, & DHS.)

91. Did the auditor audit as major programs federal programs that, in the aggregate, encompass at
    least 50% of total federal awards expended? (Note 1: If the auditee meets the criteria for a
    low risk auditee, the auditor is only required to audit as major programs federal programs
    with federal awards expended that, in the aggregate, encompass at least 25% of total federal
    awards expended.) (A-133, §.520(f), GUIDE-GAS/A-133, 8.21)
    (Note 2: This percentage-of-coverage rule should be applied after the auditor determines the
    programs to be audited as major. (GUIDE-GAS/A-133 8.18 & 8.21, footnote 2))

92. Do audit findings presented in the schedule of findings and questioned costs contain the
    following detail, as applicable: (A-133, §.510(b); GUIDE-GAS/A-133, 13.39 & 13.40; GAS
    4.14 – 4.18)

    a.   identification of the federal program and specific federal award including the CFDA title
         and number, the federal award number and year, the name of federal agency, and the
         name of the applicable pass-through entity? (Note: When information such as the CFDA
         title and number or the federal award number is not available, the auditor should provide
         the best information available to describe the federal award.)

    b.   the criteria or specific requirement upon which the finding is based, including statutory,
         regulatory, or other citation?

    c.   the condition found, including facts that support the deficiency identified in the finding?

    d.   the cause (i.e., reason or explanation for the difference between the condition and the
         criteria – may serve as a basis for the recommendation)? (GAS 4.17)

    e.   identification of questioned costs and how they were computed?

    f.   information to provide proper perspective for judging the prevalence and consequences
         of the audit finding, such as whether the audit findings represent an isolated instance or a
         systemic problem? (Note: Where appropriate, the instances identified should be related
         to the universe and the number of cases examined and be quantified in terms of dollar
         value.)

    g.   the possible asserted effect to provide sufficient information to the entity and federal
         agency, or pass-through entity in the case of a subrecipient, to permit them to determine
         the cause and effect to facilitate prompt and proper corrective action?

    h.   recommendations to prevent future occurrences of deficiency identified in the finding?

    i.   the views of responsible officials of the entity, as well as corrective action plans (see
         checklist items #95 & 96, below)? (GAS 5.32)

         (1) To the extent practical, are the views of responsible officials of the entity reported
             when there is disagreement with the audit findings, and does the auditor address the
             reasons for disagreement or when planned corrective actions do not adequately
             address the auditors’ recommendations? (GAS 5.37; GUIDE-GAS/A-133, 13.40,
             footnote 28)



                                                               -80-
DESK REVIEW – 2010

REVIEW ITEM                                                                                             YES   NO   N/A   REF

93. Do audit findings include a reference number to allow for easy referencing of the audit
    findings during follow-up? (A-133, §.510(c); GUIDE-GAS/A-133, 13.41)

94. Are audit findings which relate to both the financial statements and federal awards reported in
    both sections of the schedule of findings and questioned costs? (Note: Reporting in one
    section may be in summary form with a reference to a detailed reporting in the other section.)
    (A-133, §.505(d)(3)(ii); GUIDE-GAS/A-133, 13.34(c)))

95. Does the audit reporting package contain a corrective action plan prepared by the auditee?
    (Note: The SAC (para. 16) and State law (MCA 2-7-515) require that the entity submit a
    response or corrective action plan within 30 days after receipt of the audit report. If the
    corrective action plan is included in the audit report, the entity has 30 days in which to submit
    it to the LGS Bureau. Also, OMB Circular A-133 requires that the entity submit the reporting
    package, which contains the corrective action plan, within the earlier of 30 days after receipt
    of the auditor’s report, or 9 months after the end of the audit period.) (A-133, §.315(a),
    §.320(a) & §.320(c))

96. Does the corrective action plan contain the following for each current audit finding – (1) the
    reference number; (2) the name(s) of the contact person(s) responsible for corrective action;
    (3) the corrective action planned; (4) the anticipated completion date of the corrective action;
    and (5) a specific explanation when the auditee does not agree with the audit findings or
    believes corrective action is not required?
    (Note 1: This numbering (or other identification) should include the fiscal year in which the
    finding initially occurred. (GUIDE-GAS/A-133, 13.41))
    (Note 2: Because the preparation of this plan is the responsibility of the entity, any items
    marked “no” will be included in the audit review letter only so that the auditor can pass the
    information on to the entity if he or she so chooses.)(A-133, §.315(a) & (c))

Other

97. Is there a finding/recommendation included in the audit report for each exception contained in
    the auditor’s opinion on the financial statements? (No specific cite for findings related to the
    financial statements; A-133 §.510(a) for findings related to federal awards)

98. Is there an auditor’s report disclosing action taken by the entity upon prior audit report
    recommendations? (SAC, para. 9.e.) (Note: This report should include the status of any
    matters presented separately in a letter to management or those charged with governance.)

99. If the report indicates the existence of a separate management letter, was a copy included with
    the report or has one already been obtained? If not, obtain a copy. (GAS 5.16; SAC, para.13)

100. If information is communicated in a management letter, does the letter indicate that it is
     intended solely for the information and use of those charged with governance and, if
     appropriate, management, specified regulatory agencies, and the Department of
     Administration, and is not intended to be and should not be used by anyone other than these
     specified parties? (AU 532.07 - .11 & .19)

101. Are the financial statements, notes, other reports or other information free of items that could
     create doubt as to the adequacy of the basic report?

102. Do the basic financial statements included in the audit report possess the basic characteristics
     of GASB Concepts Statement No. 1 (i.e., understandability, reliability, relevance, timeliness,
     consistency, comparability) and do the financial statements foot, cross-foot, and reconcile to
     each other and to the prior-year financial statements? (MCA 2-7-503 – The financial report
     must be in a form prescribed by our Bureau or OPI.)



                                                               -81-

								
To top