Audits applicable to the guaranty associations subject to the provisions of this subchapter shall take the form of financial, performance or operational audits, and may include, but not be limited to, the types of audits which are described in paragraphs (1)-(4) of this section.     
       (1) Financial audits. The financial audit shall be undertaken annually by an independent certified public accountant to determine whether the financial statements of the audited entity present fairly the financial position and the results of financial operations in accordance with generally accepted accounting principles. The financial audits shall be conducted in accordance with generally accepted auditing standards.      
       (2) Compliance audit. A compliance audit may be undertaken to determine whether the following objectives are being met:                (A) the audited entity has obligated, expended, received, and used funds in accordance with the purpose for which those funds have been authorized by law;                 (B) the audited entity has obligated, expended, received, and used funds in accordance with any limitations, restrictions, conditions, or mandatory directions imposed by law on those obligations, expenditures, receipts, or uses;                 (C) the audited entity has maintained its books, records, and accounts in a manner which accurately reflects its financial and fiscal operations relating to the obligation, receipt, expenditure, and use of funds including, but not limited to, funds collected for a public purpose;                 (D) the audited entity has collected all revenues and receipts in accordance with the applicable laws and regulations of this state; and                 (E) the audited entity has properly and legally handled or administered any money, negotiable securities, or similar assets received in accordance with the entity's governing statute.        
       (3) Economy and efficiency audit. An economy and efficiency audit may be undertaken to determine whether the objectives set out in subparagraphs (A) and (B) of this paragraph are being met and such audit shall make the identifications set out in subparagraph (C) of this paragraph, as follows:                (A) the audited entity is managing or utilizing its resources, including funds, personnel, contractors and subcontractors, consultants, procurement of professional services, property, equipment, and space, in an economical and efficient manner;                 (B) the audited entity has presented financial, program, and statistical reports in a fair manner, and such reports contain useful data; and                 (C) the causes of inefficiencies or uneconomical practices, including inadequacies in management information systems, internal and administrative policies and procedures, purchasing, procurement and contracting practices, organizational structure, use of personnel, contractors, equipment and other resources, have been identified.        
       (4) Effectiveness audit. An effectiveness audit may be undertaken to determine whether the following objectives are being met:                (A) the audited entity is attaining program objectives established pursuant to statutes and regulations, or by program criteria or program evaluation standards applicable to it, in an efficient and effective manner;                 (B) the audited entity is contributing to achievement of those benefits intended by program design in an efficient and effective manner;                 (C) the audited entity is discharging its duties and responsibilities under statutes and regulations or according to program performance criteria or program evaluation standards applicable to it in an efficient and effective manner; and                 (D) the audited entity is performing its duties and responsibilities in connection with a program which does not duplicate, overlap, or conflict with the duties, functions, and responsibilities of another entity with respect to the same program, or with another program designed and intended to be applied to the same persons served by the audited entity.        
     Source Note:        The provisions of this §31.204 adopted to be effective April 3, 2002, 27 TexReg 2508