What is the Difference Between the General Financial Audit for the Entire District and the Required Financial and Performance Audits of the Bond Program(s)?

The financial audit of the district’s Annual Report (or Annual Comprehensive Financial Report) includes the external presentation of the entire district’s financial position, required to be presented under Generally Accepted Accounting Principles (“GAAP”) and Generally Accepted Government Accounting Practices (“GAGAP”) and audited under Generally Accepted Auditing Standards (“GAAS”) and Government Audit Standards (U.S. Government Accountability Office “Yellow Book”).

As to the financial audit requirements for the construction bond program(s), these are limited to those expenditures for that

specific purpose from that particular funding source and related funding sources, as required by California statute.  The same general accounting and auditing standards apply.

Proposition 39 (2000), which established the School Construction Bond program, and its enabling legislation in the Education Code, also set specific requirements for annual performance audits, specifically what is known as a compliance audit, chiefly to test if bond fund expenditures are for properly authorized projects.  The board, preferably working with the CBOC, may extend the performance audit requirements beyond the statutory minimum requirements.

Most commonly, both audits are performed by the same auditor simultaneously.  Some audit work can be used to satisfy the requirements for both, but the audits of the bond program require additional unique work to be performed.  It is also possible for these two audit requirements to be performed separately by different firms. However, this is not commonly done for the minimum required performance audits because the costs would be higher and require more resources from the entity being audited to work with two sets of auditors.  For more extensive performance audits, such as those looking at detailed construction program management procedures and practices and program results performance audits, more specialized audit experience may be desirable.

For California districts, it is typical for other required financial reports, such as those for federal grants, to be performed by the same “single auditor.”

1. This extended form of the annual report was formerly known as the Comprehensive Annual Financial Report, commonly shortened to “CAFR.”  However, when spoken, the latter sounds similar to an offensive slur in Afrikaner, so the Government Financial Officers Association has decided to no longer use the older term.

2. California Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, Appendix A, Local School Construction Bond Audits, published by Education Audit Appeals Panel.

74 – What is the difference between the general financial audit for the entire district and the required financial and performance audits of the bond program(s)? 05.07.23-TR