(a) Each audit required by sections 4-230 to 4-236, inclusive, shall:

(1) Be conducted in accordance with generally accepted government auditing standards, except that, for the purposes of said sections such standards shall not be construed to require economy and efficiency audits, program results audits, or program evaluations; and

(2) Except in the case of program-specific audits, cover the entire operations, including financial operations, of the nonstate entity, except that such audit may exclude public hospitals.

(b) Each such audit shall determine and report whether: (1) The financial statements of the nonstate entity are presented fairly in all material respects in conformity with generally accepted accounting principles; (2) the schedule of expenditures of state financial assistance of the nonstate entity is presented fairly in all material respects in relation to the financial statements taken as a whole; (3) in addition to the requirements of generally accepted government auditing standards, the auditor has performed procedures to obtain an understanding of internal control over state programs sufficient to (A) plan the audit to support a low assessed level of control risk for major state programs, (B) plan the testing of internal control over major state programs to support a low assessed level of control risk for the assertions relevant to the compliance requirement for each major state program, and (C) perform testing of internal controls; and (4) the nonstate entity has complied with laws, regulations and grant or contract provisions that may have a material effect upon individual compliance requirements for each major state program. In complying with the requirements of subdivision (4) of this subsection, the independent auditor shall select and test a representative number of transactions from each major state program to provide the auditor sufficient evidence to support an opinion of compliance. Each audit report shall identify which programs were tested for compliance.

(c) When the total expenditures of a nonstate entity’s major state programs are less than fifty per cent of such nonstate entity’s total expenditures of state financial assistance, excluding exempt program expenditures, the independent auditor shall select and test additional programs as major state programs as may be necessary to achieve audit coverage of at least fifty per cent of the nonstate entity’s total expenditures of state financial assistance, excluding exempt program expenditures.

(d) If an audit conducted pursuant to this section finds any material or reportable noncompliance by a nonstate entity with applicable laws, regulations and grant or contract provisions, or finds any significant deficiency or material weakness with respect to the internal controls of the nonstate entity concerning the matters described in subsection (b) of this section, the nonstate entity shall submit to appropriate state officials a plan for corrective action to eliminate such material or reportable noncompliance, significant deficiency or material weakness.