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SCO Desk Review Process

Education Code 14504 requires the State Controller’s Office (SCO) to review and monitor the audit reports performed by independent auditors on an annual basis. The SCO shall determine whether audit reports are in conformance with reporting provisions.

The State’s report certification process requires that the SCO perform a desk review of the LEA’s annual audit report. The review will ensure that the audit report meets the minimum reporting standards contained in the audit guide. The SCO will then reject or certify the report.

Certification Letter - If the SCO certifies the report, the LEA and auditor will receive a letter stating that the audit report conforms to the reporting standards contained in the audit guide. The letter also specifies that the LEA may release the portion of the audit fee withheld under the provisions of California Education Code Section 14505.

Rejection Letter - If the SCO rejects the report, a letter is sent to the independent auditor and LEA that describes the exception(s) noted during the SCO’s review. The auditor has 30 days from receipt of the letter to make the correction. Upon receipt, the SCO will review the revised audit report and notify the auditor and LEA of the review results. The audit fee percentage stipulated in the audit contract must be withheld until the audit report is certified.

Apportionment Significant Findings Certification Letter - If the audit report contains a finding or findings that may be considered apportionment-significant, the LEA will receive a certification letter with information on its appeal rights. The LEA has 30 days from the date on which the U.S. Postal Service delivers the letter to request summary review of any apportionment-significant audit finding or findings, on the grounds of substantial compliance. In addition, the LEA has 60 days from delivery of the letter or 30 days following the conclusion of a summary review, with regard to the findings included in that review, to file a formal appeal of any apportionment-significant finding or findings on any one or more of the grounds set forth in California Education Code section 41344(d). For more information on audit finding appeals, visit the Education Audit Appeals Panel Web site at