(1) As provided by 2-7-503(3) (b) , MCA, the governing body or managing or executive officer of a local government entity that is not required to have an audit based on the criteria established in 2-7-503(3) (a) , MCA, shall at least once every four years, if directed by the department, or, in the case of a school district or associated cooperative, if directed by the department at the request of the superintendent of public instruction, cause a financial review to be conducted of the financial statements of the entity for the preceding fiscal year.

(2) A "financial review" is defined as an agreed-upon procedures engagement in which the independent auditor is engaged to issue a report of findings based on specific procedures performed on subject matter in accordance with standards established by the American institute of certified public accountants [see ARM 2.4.411(5) ]. The procedures to be performed during the financial review of a specific type of local government entity are prescribed by the department and are specified in the contract referred to in (4) .

(3) Financial reviews of a local government entity conducted at the direction of the department must be performed by an independent auditor, as defined by 2-7-501(6) , MCA, who is on the department's roster of independent auditors authorized to conduct audits of local government entities.

(4) Financial reviews required by the department must be performed pursuant to a contract entered into by the local government entity, the independent auditor, and the department. Work may not commence under the contract until it is signed by the department. All contracts for conducting financial reviews must be in a form prescribed by the department.

(5) The compensation to the independent auditor for conducting a financial review must be agreed upon by the local government entity and the independent auditor and must be paid in the manner that other claims against the local government entity are paid.

(6) The provisions of 2-7-517(2) , MCA, regarding the penalty for failing to pay an audit fee applies to the failure to pay a financial review fee.

(7) Reports on financial reviews must be prepared in accordance with reporting standards established by the American institute of certified public accountants for agreed-upon procedures engagements [see ARM 2.4.411], and in addition must include any schedules specified in the contract referred to in (4) .

(8) The independent auditor shall file copies of the financial review report with the department. In the case of school districts or associated cooperatives, the independent auditor shall also file a copy of the review report with the superintendent of public instruction.

(9) The provisions of 2-7-515, MCA, and ARM 2.4.409, regarding the actions of local government governing bodies to resolve and correct audit findings and the penalty for failure to do so apply to financial review reports.

(10) The provisions of 2-7-522, MCA, regarding audit report reviews by the department apply to financial review reports.