Final Reminder: Annual Audits and Qualifying Statements Must Be Filed by December 31

The December 31 deadline for filing annual audits and qualifying statements is fast approaching. School officials should take the necessary steps to ensure that audits are filed with the Michigan Department of Education (“MDE”) and that the Municipal Finance Qualifying Statement form is filed with the Michigan Department of Treasury (“Treasury”) on or before December 31, 2013, to avoid late fees and other negative consequences.

Annual Audits

The timely filing of the annual audit is not only mandated by law but also plays a critical role in determining whether municipalities (including local school districts, intermediate school districts, community colleges, and public school academies) are granted “qualified status” by Treasury (see discussion below relating to “Qualifying Statements”). Treasury will not grant qualified status to a municipality unless its audit has been filed with Treasury in a timely fashion. A municipality that files its annual audit after the deadline will be denied qualified status for the succeeding year. Ideally, school officials should file the audit first and then file the Municipal Finance Qualifying Statement with Treasury. Both tasks must be accomplished by Tuesday, December 31, 2013.

Thrun Law Firm urges school officials to take the task of filing the audit into their own hands to ensure that it is accomplished by the December 31 deadline. We are aware of several clients that have been denied qualified status by Treasury in recent years due to a late-filed audit even though the filing was performed by, and the late filing was the fault of, an auditing firm. The bottom line is that the timely filing of the audit with Treasury is a strict prerequisite for obtaining qualified status, and a late-filed audit will result in a denial of qualified status, regardless of who is responsible.

School officials also should be aware that Michigan law mandates that annual audits be filed both with Treasury and with MDE, although only the former has a bearing on whether a school district will be granted qualified status. Before September 2010, the audit filings had to be performed separately with each department. MDE and Treasury now have a streamlined process for the submission of audits. Specifically, electronically filing an audit with MDE now satisfies the audit filing requirements for both MDE and Treasury. For more information regarding the unified audit filing procedure, please see MDE Memorandum #114-10, dated September 23, 2010, which can be found on MDE’s website. MDE also has created a webpage titled “Guidance on Electronic Filing of Financial Statement Audits” to assist school officials.

While Michigan law does not mandate that audits be filed electronically with MDE and Treasury, electronic filing is encouraged. In addition, electronic filing appears to be the only way to take advantage of the unified process for audit submission. Thrun Law Firm strongly recommends that audits be filed electronically, by certified mail, or overnight carrier, so that the delivery is confirmed and may be proven if an issue arises as to whether the audit was filed by the deadline. Having a receipt to verify that the audit was timely filed may mean the difference between obtaining or being denied qualified status.

Qualifying Statements

School officials also must file the Municipal Finance Qualifying Statement form with Treasury by Tuesday, December 31, 2013. The annual filing of the Qualifying Statement form is required to obtain “qualified status” for 2014. Obtaining qualified status permits municipalities to more swiftly issue most types of municipal financings (bonds, state aid notes, and tax notes) and reduces the related state filing fees.

Qualifying Statements now must be filed in a different manner than in the past. Pursuant to Treasury Bulletin 6, Treasury introduced a new form of Qualifying Statement (Form 5047), a fillable .pdf form that must be completed and uploaded as a .pdf file. School officials should review Bulletin 6 in detail before completing the new Qualifying Statement Form 5047. Bulletin 6, the new Form 5047, and the link to the new upload page are all available on Treasury’s “Online Qualifying Statement” webpage. The instructions provided on that webpage also state that school officials must telephone Treasury at (517) 373-3227 to obtain a new username and password for use in uploading the completed Qualifying Statement, unless the school’s chief administrative officer authorizes the school’s auditor to file the Qualifying Statement with Treasury on the school’s behalf – a process which is now permitted under Bulletin 6. Please also refer to the November 2013 edition of School Law Notes for more details regarding the new Qualifying Statement form.

As part of our service to our retainer and regular finance clients, Thrun Law Firm’s municipal finance attorneys will review a Qualifying Statement at a client’s request before filing, without additional charge. We urge our clients to take advantage of this service to avoid being wrongfully denied qualified status. If you would like to have a Qualifying Statement reviewed before submission to Treasury, please contact the Thrun Law Firm attorney who regularly handles your school’s bond and finance matters.