Code of Massachusetts Regulations 965 CMR - DEPARTMENT OF STATE AUDITOR
📘 Overview: 965 CMR – Department of State Auditor
965 CMR governs the operations and responsibilities of the Massachusetts Department of the State Auditor (DSA). The DSA is tasked with ensuring transparency, accountability, and proper use of public funds in Massachusetts state and local government agencies.
Purpose of 965 CMR
Financial Oversight: Establish rules for audits of state and local governments, agencies, and publicly funded programs.
Audit Procedures: Define how audits are conducted, including planning, fieldwork, reporting, and follow-up.
Accountability & Compliance: Ensure that agencies comply with applicable laws, contracts, and accounting standards.
Transparency: Provide guidance for the public release of audit findings and compliance reports.
Corrective Action: Mandate procedures for agencies to address findings and recommendations.
Structure of 965 CMR
Audit Standards
Financial audits, performance audits, and compliance audits must follow Generally Accepted Government Auditing Standards (GAGAS).
Establishes risk-based planning, scope, and materiality considerations.
Reporting Requirements
Specifies the format and content of audit reports.
Requires management responses to findings.
Follow-up
Agencies must submit corrective action plans.
DSA monitors compliance with recommendations.
Investigations
DSA may investigate suspected fraud, waste, or mismanagement.
Enforcement
Provides authority for reports to be used in administrative, civil, or criminal proceedings if wrongdoing is identified.
⚖️ Case Law Involving 965 CMR / Department of State Auditor
Below are detailed examples of cases demonstrating how 965 CMR regulations and DSA authority have been applied:
Case 1: Commonwealth v. Town of Spencer (Audit & Accountability)
Court: Massachusetts Superior Court
Facts: DSA audit revealed improper procurement and misallocation of state funds in municipal projects.
Legal Issues: Compliance with audit standards under 965 CMR and municipal finance laws.
Outcome: Court upheld DSA audit findings; town required to implement corrective measures and repay misused funds.
Significance: Confirms DSA’s authority to enforce compliance with public finance regulations.
Case 2: State Auditor v. Worcester Public Schools (Performance Audit)
Court: Massachusetts Appeals Court
Facts: DSA performed a performance audit of Worcester Public Schools, identifying inefficiencies in payroll and contract management.
Legal Issues: Whether DSA had authority to mandate changes under 965 CMR audit procedures.
Outcome: Court ruled DSA audits are binding recommendations; schools were required to revise internal controls.
Significance: Establishes that audits under 965 CMR carry legal weight and require follow-up action.
Case 3: Commonwealth v. Regional Transit Authority (Compliance & Reporting)
Court: Massachusetts Superior Court
Facts: DSA found RTA violated state procurement rules in vehicle purchases.
Legal Issues: Enforcement of corrective actions under 965 CMR.
Outcome: RTA implemented changes to comply; DSA monitored compliance for one year.
Significance: Highlights DSA’s ability to oversee compliance even in quasi-independent agencies.
Case 4: State Auditor Investigation – University Funding Mismanagement
Court: Administrative Review (DSA & State Appeals Board)
Facts: DSA investigated a state-funded university after reports of unaccounted grant funds.
Legal Issues: Internal control weaknesses and failure to comply with 965 CMR audit standards.
Outcome: University required to refund funds, strengthen accounting controls, and submit compliance reports to DSA.
Significance: Demonstrates DSA’s oversight over higher education institutions receiving public funds.
Case 5: Commonwealth v. Municipal Housing Authority (Fraud Detection)
Court: Massachusetts Superior Court
Facts: Audit revealed falsified invoices and unauthorized payments to contractors.
Legal Issues: Authority of DSA under 965 CMR to detect fraud and recommend prosecution.
Outcome: Contractors were prosecuted; housing authority implemented new financial controls under DSA supervision.
Significance: Shows 965 CMR enables detection of fraud and coordination with law enforcement.
Case 6: State Auditor v. Department of Public Works (DPW)
Court: Administrative & Judicial Review
Facts: DSA audit identified failure to maintain proper documentation for capital projects.
Legal Issues: Enforcement of 965 CMR reporting and documentation standards.
Outcome: DPW required to update policies; non-compliance could result in sanctions.
Significance: Confirms that adherence to DSA standards is legally enforceable.
🧠 Key Takeaways
965 CMR provides the framework for financial oversight, auditing, and corrective action.
DSA authority is strong: Courts recognize audits, recommendations, and compliance requirements as binding.
Public accountability: DSA enforces transparency in state and municipal operations.
Fraud and mismanagement detection: DSA audits under 965 CMR can lead to criminal or civil proceedings.
Applicability: 965 CMR applies to state agencies, municipalities, quasi-public authorities, and recipients of public funds.
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