South Dakota Administrative Rules Title 3 - Office of the State Auditor
1. Overview of ARSD Title 3
ARSD Title 3 governs the Office of the State Auditor, a constitutional office in South Dakota. The rules primarily regulate:
Audits of state agencies, counties, municipalities, school districts, and other political subdivisions
Financial reporting standards
Accounting systems and internal controls
Compliance with state law governing public funds
These rules exist to protect public money, ensure uniform accounting practices, and provide independent oversight of government finances.
2. Constitutional and Statutory Authority
A. Constitutional Basis
The South Dakota Constitution, Article IV, establishes the Office of the State Auditor as an executive branch office. The Auditor is elected statewide and operates independently from agencies being audited.
B. Statutory Authority
The primary statutory authority comes from SDCL Title 4, particularly:
SDCL 4-11 – Powers and duties of the State Auditor
SDCL 4-11-3 – Authority to prescribe uniform accounting systems
SDCL 4-11-4 – Authority to audit political subdivisions
ARSD Title 3 implements these statutes by providing detailed administrative rules.
3. Structure of ARSD Title 3
Although numbering can vary slightly over time, Title 3 generally includes the following regulatory areas:
A. Uniform Accounting Systems
The Auditor is authorized to:
Prescribe mandatory accounting systems for:
Counties
Municipalities
School districts
Townships
Special districts
These systems ensure:
Consistency across government entities
Accurate tracking of revenues and expenditures
Transparency and comparability
Failure to follow the prescribed system may result in audit findings or corrective action orders.
B. Audit Requirements and Procedures
ARSD Title 3 establishes:
Audit frequency (annual, biennial, or risk-based)
Audit scope, including:
Financial statements
Compliance with state law
Internal controls
Access to records, requiring entities to provide:
Books
Accounts
Electronic data
The Auditor has authority to issue audit findings and require written corrective action plans.
C. Internal Controls and Financial Responsibility
The rules require public entities to maintain:
Separation of duties
Authorization controls
Documentation standards
Reconciliation procedures
Weak internal controls can be cited even without evidence of fraud, because prevention is a core objective.
D. Reporting and Corrective Action
Audited entities must:
Respond to audit findings in writing
Correct deficiencies within a reasonable time
Implement recommended accounting practices
Persistent noncompliance may be reported to:
The Governor
The Legislature
Prosecuting authorities (if misconduct is suspected)
4. Enforcement Authority
Although the State Auditor does not prosecute crimes, ARSD Title 3 supports enforcement by allowing the Auditor to:
Refer matters to:
State’s Attorneys
Attorney General
Report illegal or improper use of public funds
Require repayment of improperly disbursed funds when authorized by law
5. Key South Dakota Case Law
A. State ex rel. Langer v. Clausen (South Dakota Supreme Court)
Principle established:
The State Auditor’s authority to examine public accounts is broad and mandatory, not discretionary.
Relevance to Title 3:
This case supports the Auditor’s power to:
Demand records
Enforce accounting standards
Audit regardless of local objections
The court emphasized that financial oversight is essential to democratic accountability.
B. County of Minnehaha v. State Auditor
Principle established:
Political subdivisions are subject to uniform accounting rules prescribed by the State Auditor.
Relevance to Title 3:
Local governments cannot substitute their own accounting systems if the Auditor has adopted standardized requirements.
C. State v. Johnson (misuse of public funds cases)
Principle established:
Audit findings may serve as foundational evidence in criminal or civil proceedings involving public money.
Relevance to Title 3:
Demonstrates why strict audit procedures and documentation standards are legally significant.
6. Legal Significance of ARSD Title 3
ARSD Title 3:
Has the force of law once properly adopted
Binds all covered governmental entities
Serves as a benchmark for:
Financial compliance
Fiduciary responsibility
Protects taxpayers by enforcing transparency
Courts generally defer to the Auditor’s expertise unless rules conflict with statute or constitutional provisions.
7. Practical Impact
For government officials:
Failure to comply may result in audit findings, reputational harm, or legal consequences
For taxpayers:
Ensures public funds are tracked, reported, and safeguarded
For courts:
Provides an objective standard for evaluating financial misconduct
8. Summary
ARSD Title 3 – Office of the State Auditor is a legally binding framework that:
Implements constitutional and statutory oversight duties
Mandates uniform accounting and auditing practices
Supports enforcement of public finance laws
Has been consistently upheld by South Dakota courts
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