(a) A private, independent audit not conducted by Arkansas Legislative Audit shall include at a minimum, review, comments, and findings on substantial compliance with laws governing each of the following as listed in Arkansas Code § 6-1-101:

1. (1) Management letter;

2. (2) Compliance with ethical guidelines for:

   1. (A) Board members;
   2. (B) Administrators; and
   3. (C) Employees;
3. (3) School elections;
4. (4) Management of schools;
5. (5) Revolving loan fund;
6. (6) School district finances;
7. (7) School district school bonds;
8. (8) Certified and classified personnel policies;
9. (9) Teachers’ salaries;
10. (10) Deposit of funds;
11. (11) Investment of funds; and
12. (12) Improvement contracts.

(c)

1. (1) All annual audits of auditees not conducted by Arkansas Legislative Audit shall be completed and filed with the Department of Education and Arkansas Legislative Audit within nine (9) months following the end of each fiscal year.
2. (2) At the request of the auditee, the Department of Education may grant an extension of up to ninety (90) days on the deadline specified in subdivision (c)(1) of this section.
3. (3) If the auditee is subject to federal circular A-133 audit requirements, any extension must first be obtained from the appropriate federal agency.
4. (4) All contracts initiated by the auditee for audit services with private certified public accountants shall contain a provision requiring completion of the audit and filing of the audit reports by the auditor with the Department of Education and Arkansas Legislative Audit within nine (9) months following the end of each fiscal year.

5. (5)

   1. (A) Any public school district or education service cooperative failing to file an audit report within the nine-month time period or within the time period under any extension granted by the Department of Education shall automatically be considered by the Department of Education to be in fiscal distress.
   2. (B) Any school district or education service cooperative identified in fiscal distress status may appeal to the State Board of Education by filing a written appeal with the office of the Commissioner of Elementary and Secondary Education, by certified mail return receipt requested, within thirty (30) calendar days of receipt of notice of being identified in fiscal distress status from the Department of Education.
   3. (C) The State Board of Education shall hear the appeal within sixty (60) calendar days of receipt of the written notice of appeal from the school district or education service cooperative.
   4. (D) The written appeal shall state, in clear terms, the reason why the school district or education service cooperative should not be classified as in fiscal distress.
   5. (E) Notwithstanding any appeal rights in this section, no appeal shall stay the Department of Education’s authority to take action to protect the fiscal integrity of any school district or education service cooperative identified as in fiscal distress.

6. (6) Any open-enrollment public charter school failing to file an audit report within the nine-month time period or within the time period under any extension granted by the Department of Education may be referred to the State Board of Education for possible modification, revocation, or denial of renewal of its charter pursuant to:

   1. (A) Arkansas Code § 6-23-105; and
   2. (B) The Department of Education’s Rules Governing Public Charter Schools, 6 CAR pt. 31.

(d) By January 31 of the calendar year following the due date of the audit, the Department of Education shall notify by certified mail any auditee failing to file the required audit that the entity is considered to be in fiscal distress or is subject to having its charter:

1. (1) Modified;
2. (2) Revoked; or
3. (3) Denied renewal.

(e) The Department of Education shall place certified public accountants or accounting firms on an ineligible list for a determined period of time, but not more than five (5) years from the end of the fiscal year for which the audit report was contracted to be prepared, for any of the following reasons:

1. (1) If in the opinion of the Department of Education or the Legislative Joint Auditing Committee, an audit report is not filed within the required time period or within a time period under any extension granted by the Department of Education or Legislative Joint Auditing Committee due to neglect or fault of the certified public accountant or accounting firm;

2. (2) If the Arkansas State Board of Public Accountancy’s quality review committee reports to the Department of Education and the Legislative Joint Auditing Committee that an audit report shows evidence:

   1. (A) Of lack of general conformity with applicable professional standards or state laws and rules; or
   2. (B) That the report is substandard or seriously questionable; or
3. (3) Any other compelling reason the Department of Education believes justifies placing the accountant or accounting firm on the ineligibility list.

(g) A certified copy of the audit shall be distributed to the:

1. (1) School district;
2. (2) Department of Finance and Administration;
3. (3) Division of Career and Technical Education; and
4. (4) Department of Education.

(i)

1. (1) If the Department of Education or the Legislative Joint Auditing Committee is concerned that an audit may be substandard or seriously questionable with respect to applicable professional auditing standards, the Department of Education or the Legislative Joint Auditing Committee may file a complaint with the Arkansas State Board of Public Accountancy.

2. (2) The Arkansas State Board of Public Accountancy shall:

   1. (A) Review all audit reports and working papers filed under subdivision (i)(1);
   2. (B) Determine whether the report is in general conformity with professional standards and state laws and rules; and
   3. (C) Take appropriate action.

(k)

1. (1) Licensed accountants shall not provide nonaudit services to a school district, education service cooperative, or open-enrollment public charter school if the licensed accountant or his or her firm is also the auditor of the:

   1. (A) School district;
   2. (B) Education service cooperative; or
   3. (C) Open-enrollment public charter school.

2. (2) Nonaudit services include:

   1. (A) Accounting and bookkeeping services;
   2. (B) Financial information systems design and implementation;
   3. (C) Appraisal, valuation, and actuarial services;
   4. (D) Internal audit outsourcing services;
   5. (E) Management or human resources functions;
   6. (F) Broker or dealer, investment advisor, or investment banking services; and
   7. (G) Legal and expert services unrelated to the audit.