Newly Elected Officials

Questions:

I am a newly elected official and want to hire a new audit firm to perform my agency’s audit. Am I required to retain the audit firm from the old administration if there is a multi-year contract that extends into my administration? May I sign a contract with a new audit firm before I take office?

If a newly elected official wishes to cancel a multi-year engagement that was entered into under a previous administration, they should consult with their legal counsel to determine whether they may do so. They must also contact LLA’s Local Government Services Engagement Manager. However, the new administration may not enter into any contract for the agency until they actually take office.

I am a newly elected official of a local government, taking office in January. My agency has a 6/30 fiscal year end. I am certain that the prior administration misappropriated public funds. I do not want any findings associated with the old administration in the audit report of my new administration. May I engage a CPA firm to perform an audit on the portion of the fiscal year that pertains to the old administration, and a separate audit on the portion of the fiscal year that pertains to my new administration?

What you are describing is referred to as a “cut-off audit.” Cut-off audits are usually not approved by LLA. Local auditees must provide for a financial report for the agency’s entire fiscal year, not part of it. In addition, the audit is on the agency or office, not on the particular person holding the office. If significant findings from a prior administration are included in a new administration’s audit report, an appropriate response from the new administration is that controls have been put in place to ensure that the problems from the old administration are not repeated. Then, the new administration should follow through to ensure that these problems are not repeated. If the findings are corrected by the new administration, this will be reported in the subsequent year’s audit.
If you have concerns about specific types of transactions (such as travel or credit cards) that have been abused, you can hire an approved CPA firm to perform an agreed upon procedures engagement relative to these transactions. These types of engagements are limited to the areas of concern, and often provide more information, at a lower cost, than a cut-off audit.